Massachusetts Supreme Judicial Court Rules in Favor of Injured Employee Because Workers’ Compensation Lien Does Not Apply to Damages for Pain and Suffering

The Massachusetts Supreme Judicial Court recently rendered a decision that affects settlements for injured workers seeking compensation for their injuries.  In DiCarlo v. Suffolk Construction Co., Inc., which included a review of two lower court rulings, the court held a workers’ compensation insurer’s lien does not provide for the reimbursement of non-economic damages recovered as part of a third-party settlement.  This ruling is important because it provides courts with more room to approve reasonable settlements of work-related accident claims involving third parties.

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Massachusetts law holds that employees who are injured in the course and scope of their employment and receive workers’ compensation benefits cannot bring a tort lawsuit against their employer for these work-related injuries.  While the advantage of the workers’ compensation scheme lies in the employee not necessarily proving negligence in order to recover benefits, the limitation is that they typically do not recover non-economic damages. Instead, workers’ compensation benefits include lost wages and medical expenses (past and future treatment). Compensation for pain and suffering, which are considered non-economic damages, are not paid by workers’ compensation insurance companies to injured employees.

The law does provide, however, that employees can pursue third-party claims for damages arising from their work-related accident.  If the employee secures damages, the workers’ compensation insurance company is entitled to a statutory lien on the recovered amount that the employee received from the insurer.  According to the law, insurers are entitled to recover the “gross sum” payment that the employee received for their injuries.

In the two cases at issue before the Supreme Judicial Court, the employees were injured in construction site accidents. They secured workers’ compensation benefits from the same insurance company.  Then, the employees brought third-party claims, based on theories of negligence, and negotiated settlements. The settlements took into account damages for pain and suffering. The employees later argued that their pain and suffering damages could not be reached by the insurer.

According to the insurance companies, they were entitled to the entire “injury,” which was the entire amount of the settlement proceeds. This was a broad definition of “injury” under the statute, and the employees contended that it should be narrowly interpreted to mean only those for which workers’ compensation benefits were payable – in other words, not pain and suffering.

The lower courts that initially reviewed these cases ruled in favor of the employee in one of them and in favor of the insurer in the other. The two decisions were then appealed. The Appellate Court found in favor of the employees, and the Supreme Judicial Court granted review.

The Supreme Judicial Court thus needed to determine whether an insurer’s lien could cover damages for pain and suffering that an injured employee received from a third-party tortfeasor. Turning to a close reading of the statute and an evaluation of its purpose, the Court stated that the insurance company would retain its right through the lien only if the injury must be one for which compensation was payable. Since pain and suffering is not compensable, the insurer was not allowed to be “reimbursed” for any damages relating to these non-economic harms.

The court also noted that the insurer has a right to participate in a hearing before any settlement is approved. Insurance companies maintain a right to reimbursement, and the court stated that injured employees should not reap a double recovery.

At the Law Offices of Attorney Michael O. Smith, we represent clients pursuing workers’ compensation benefits for their injuries. After a work-related accident, you may be entitled to compensation for your lost wages and your past and future medical costs.  Contact our office at (617) 263-0060 to set up your free consultation with an experienced Boston workers’ compensation attorney.

More Blog Posts:

Maximum Partial Incapacity Benefits Awarded to Massachusetts Employee in Reviewing Board Decision, Based on Policy Considerations Not to Deny Benefits to Seriously Injured Workers, Boston Workers Compensation Attorney Blog, October 27, 2016

Massachusetts Reviewing Board Awards Total Incapacity Workers’ Compensation Benefits to Employee Based on Combination of Previous Work-Related Injuries and Industrial Incident, Boston Workers Compensation Attorney Blog, October 17, 2016