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3rd Party Liability

If there is a 3rd party involved in a workers' compensation case, you can go through the Department of Industrial Accidents to get the 3rd party settlement approved.

Table of Contents

Directions for submitting a 3rd party (§ 15) petition

The Department of Industrial Accidents reviews more than 1,200 3rd party petitions each year. The directions for filing are clearly set forth on the form: it is to be sent to the department's central scheduling unit along with a copy of:

  • The contingent fee agreement, 
  • Substantiation of all expenses claimed, 
  • 4 copies plus an original, and 
  • Everything is to be submitted via email to Edna.Smith@mass.gov

Attorneys who follow the filing instructions and answers the questions posed on the petition find this a rewarding niche area of workers' compensation practice.

Lump sums and 3rd party settlements

Either the injured worker or the worker's compensation insurer may initiate a 3rd party recovery under MGL c. 152, § 15 (the insurer must wait until 7 months after the date of injury).

There is no requirement under the law that the settlement be in the best interest of 1 party or the other. However, when there is a lump sum under MGL c. 152, § 48 that is heard simultaneously with the § 15 petition, the statutory mandate under § 48 (that the lump sum settlement must be in the employee's best interest) predominates.

Practice Note:

It is dangerous to present an approval of a § 15 petition in court when the overall agreement includes a lump sum. Most often in these cases, the workers' compensation insurer is waiving a portion or all of its prior right to recovery for 3rd party. A problem arises where the court approves a 3rd party petition and the Department of Industrial Accidents (DIA) judge does not think the lump sum is in the best interests of the plaintiff/injured worker. Better practice is to do both simultaneously at the DIA.

Do you need to file a 3rd party petition?

The statute reads: "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, the reviewing board, 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."

The department provides an opportunity for a hearing, but most petitioners opt for a paper review.

Is this review mandatory? Yes. This is most often asked by an attorney with a signed release and a check that is ready to be cashed. The statute is clear on this point. The agreement, when approved, is enforceable in superior court.

Who pays the attorney?

This question really asks what percent of the contingency fee (typically 1/3) is paid by the employee and what percent is paid by the workers' compensation insurer. When workers' compensation insurers try to have the employee pay the full attorney fee, petitions so drafted are not approved.

Practice Note:

There is a Section 15 Interactive Petition V.2.62 that includes a Section 15 Calculator Version 8.5  - an immense help to those who do not do this work often.

The "Hunter" question

A petition is returned for a substantive defect usually because the answer to paragraph 14 is not correct: In the event the plaintiff/injured worker establishes entitlement to future MGL c. 152 workers' compensation payments, set out the agreement between the plaintiff/injured worker and the workers' compensation insurer with regard to reimbursement of the employee's proportionate share of attorney fees and expenses as provided by Hunter v. Midwest Coast Transport, Inc., 400 Mass. 779 (1987).

(1) Although a claim is closed on an insurer's books and archived, and although an employee is through treating and back to work, the employee's attorney cannot "close" the workers' compensation case by asserting in a petition that the employee will never seek benefits on a particular claim. Absent an approved lump sum, an attorney may not foreclose the employee's future ability to receive benefits. Even with a lump sum, medical and rehabilitation benefits may remain open if it is an accepted case.

(2) Generally speaking, the only times "not applicable" is an appropriate answer comes when the employee is deceased, or where a lump sum occurred on an "unaccepted basis," which precludes any reason for the employee to expect further benefits to be paid.

(3) Lump sums settled on an "accepted" basis cause some problems because even practiced attorneys sometimes miscalculate the effect of the "excess" on the payment of their client's causally connected medical benefit. Routinely such are paid at 100% of the approved rate by the workers' compensation insurer; however, as the workers' compensation insurer is entitled to get a dollar back from a 3rd party insurer for each dollar it has paid out on the injured worker's medical benefits, under Hunter the employee may find the insurer will pay only 33.3%  of the medical benefit (and the employee will pay 66.6%) until the "excess" recovery is exhausted and the insurer resumes paying 100% of the causally connected medical bills. This needs to be written into the agreement, and absent it the petition will not be approved. (Actual percentages may vary.)

Date published: August 10, 2018

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