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Callaghan v. Car Parts International, LLC

Supreme Court of Connecticut

July 31, 2018

PATRICK CALLAGHAN
v.
CAR PARTS INTERNATIONAL, LLC, ET AL.

          Argued November 8, 2017

         Procedural History

         Appeal from the decision of the workers' compensation commissioner for the first district determining that the named defendant was entitled to a moratorium against paying a certain amount of future workers' compensation benefits, brought to the Compensation Review Board, which affirmed the commissioner's decision, and the plaintiff appealed. Reversed; judgment directed.

          Gary J. Strickland, for the appellant (plaintiff).

          William J. Shea, for the appellees (defendants).

          Patrick D. Skuret filed a brief for the Connecticut Trial Lawyers Association as amicus curiae.

          Palmer, McDonald, Robinson, D'Auria, Kahn and Vertefeuille, J. [*]

          OPINION

          D'AURIA, JUDGE

         In this appeal from the Compensation Review Board, we consider the extent of an employer's right to a credit against its obligation to pay workers' compensation benefits for an injured employee when that employee has recovered damages from a third-party tortfeasor who caused the employee's injuries. When an employee is injured in a work related accident, the Workers' Compensation Act (act), General Statutes § 31-275 et seq., bars the employee from bringing an action for damages against the employer but, also, requires employers to pay certain benefits to the injured employee. These benefits can include covering the employee's medical expenses or providing compensation for disabilities resulting from the injury. See General Statutes § 31-275 (4).[1]

         When the employee's injury is caused by a third-party tortfeasor-someone other than the employee or the employer or its agents-the act allows either the employer or the employee to bring an action in tort to recover damages from the third party. General Statutes § 31-293 (a); Libby v. Goodwin Pontiac-GMC Truck, Inc., 241 Conn. 170, 174, 695 A.2d 1036 (1997). If damages are recovered in the third-party action, § 31-293 (a) requires that, after deducting attorney's fees and litigation expenses, the employer must be reimbursed from the net proceeds of the action for any workers' compensation benefits the employer has paid to or on behalf of the injured employee. General Statutes § 31-293 (a). Any remaining proceeds from the third-party action must be ‘‘assessed in favor of the injured employee.'' General Statutes § 31-293 (a).

         After the resolution of the third-party action, the employer remains liable to pay for any later arising workers' compensation benefits due the employee, but our case law interpreting § 31-293 (a) establishes that this subsection implicitly affords the employer a setoff, or a credit, against any later arising benefits in the amount of any proceeds the employee received in the action against the third party. See, e.g., Enquist v. General Datacom, 218 Conn. 19, 20-21, 587 A.2d 1029 (1991). This credit is often referred to as a ‘‘ ‘moratorium' '' against future payments. Id., 27 n.7; see also R. Carter et al., 19 Connecticut Practice Series: Workers' Compensation (Supp. 2017) § 15:6, p. 375. The moratorium remains in place until the workers' compensation benefits due after the judgment exceed the amount the employee received from the action against the third party. Enquist v. General Datacom, supra, 25-26. Once the employee's later arising workers' compensation benefits exceed the amount of the employee's recovery, the employer again becomes obligated to pay the employee's benefits. See id.

         In 2011, the legislature amended § 31-293 (a) to allow the employee, if the employee initiated the third-party action, to keep one third of the net proceeds due to the employer from that action, regardless of how much the employer is owed for reimbursement. Public Acts 2011, No. 11-205, § 1 (P.A. 11-205). The relevant portion of P.A. 11-205 provides: ‘‘If the action has been brought by the employee, the claim of the employer shall be reduced by one-third of the amount of the benefits to be reimbursed to the employer, unless otherwise agreed upon by the parties, which reduction shall inure solely to the benefit of the employee . . . .'' Under this amendment, even if the employer is owed more than is recovered in the third-party action, the employee retains one third of the proceeds for his sole benefit.

         The specific question we address in this appeal is whether the moratorium applies to the one-third portion of the employer's recovery that inures solely to the employee's benefit-that is, whether the employer has a right to a setoff against its obligation to pay for post-judgment workers' compensation benefits until those benefits exceed the one-third portion that the employee received from the proceeds of the third-party action. We conclude that the employee's one-third portion is not subject to the moratorium, and, as a result, the employer does not receive a credit against later arising benefits for the one-third portion paid to the employee.

         I

         In the present case, the plaintiff, Patrick Callaghan, was injured in a work related automobile collision while working for the defendant, Car Parts International, LLC.[2] The plaintiff brought an action for damages against a third party, who was also involved in the accident. The plaintiff also sought and received about $74, 000 in workers' compensation benefits from the defendant. The plaintiff and the third party later settled the action for $100, 000. The net proceeds of the settlement-after the deduction of attorney's fees and litigation costs-totaled about $66, 000.

         The plaintiff reimbursed the defendant out of the proceeds of the settlement, deducting for himself one third of the amount to be reimbursed, as required by § 31-293 (a). The defendant's two-thirds share of the net proceeds totaled about $44, 000; the plaintiff's one-third share amounted to about $22, 000.

         After the settlement and reimbursement, the plaintiff required additional medical care for the work related injury and was treated by his authorized physician. The defendant denied payment for the service, claiming that it was entitled to a moratorium in the amount of the net ...


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