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ELAINE SCHEMPP v. CITY NEW YORK (05/28/68)

SUPREME COURT OF NEW YORK, APPELLATE DIVISION, FIRST DEPARTMENT 1968.NY.41866 <http://www.versuslaw.com>; 290 N.Y.S.2d 395; 30 A.D.2d 129 May 28, 1968 ELAINE SCHEMPP, AS ADMINISTRATRIX OF THE ESTATE OF JOHN T. SCHEMPP, DECEASED, RESPONDENT-APPELLANT,v.CITY OF NEW YORK, RESPONDENT. SPECIAL DISABILITY FUND, APPELLANT. LIBERTY MUTUAL INSURANCE COMPANY, RESPONDENT Cross appeals from parts of an order of the Supreme Court at Special Term (George Tilzer, J.), entered October 20, 1967 in Bronx County, disposing of the proceeds of a judgment entered by claimant against defendant. Gilbert Siegal of counsel (Harry Merwin with him on the brief; Garrell & Garrell, attorneys), for respondent-appellant. John M. Cullen of counsel for Special Disability Fund, appellant. Albert P. Thill for Liberty Mutual Insurance Company, respondent. McNally, J. Botein, P. J., Stevens and McGivern, JJ., concur with McNally, J.; Eager, J., dissents in opinion. Author: Mcnally


Cross appeals from parts of an order of the Supreme Court at Special Term (George Tilzer, J.), entered October 20, 1967 in Bronx County, disposing of the proceeds of a judgment entered by claimant against defendant.

McNally, J. Botein, P. J., Stevens and McGivern, JJ., concur with McNally, J.; Eager, J., dissents in opinion.

Author: Mcnally

 The questions presented by this appeal are (1) whether the judgment herein arose out of a third-party action within the meaning of section 29 of the Workmen's Compensation Law, and (2) the lien, if any, of the Special Disability Fund, established under subdivision 8 of section 15 of the said statute.

Decedent was employed by United Parcel Service as a driver's helper. On October 3, 1958 decedent's truck stalled. Decedent pushed the stalled truck. An acute myocardial infarction followed. He died October 4, 1958 at a hospital of the defendant City of New York. Plaintiff instituted this action for wrongful death against the City of New York, alleging decedent's death was caused by negligence in his care and treatment. Plaintiff ultimately recovered a judgment in the sum of $41,434.57 entered April 27, 1966.

The Workmen's Compensation Board on May 21, 1959 made a death benefit award to decedent's widow, the plaintiff, and his three children against decedent's employer and its insurance carrier, Liberty Mutual Insurance Company. Said award was modified June 5, 1962 to provide that the insurance carrier was entitled to reimbursement from the Special Disability Fund for all benefits beyond 104 weeks, under the provisions of subdivision 8 of section 15 of the Workmen's Compensation Law.

Subdivision 8 declares the legislative policy to remove obstacles to the employment of partially disabled or physically handicapped persons. Paragraph (e) provides in case of death resulting from an accident arising out of and in the course of employment, if it be determined that the death would not have occurred except for such pre-existing permanent physical impairment, the employee or his insurance carrier "shall be reimbursed from the special disability fund created by this subdivision for all death benefits payable in excess of one hundred four weeks." Implicit in the modified award of June 5, 1962 of the Workmen's Compensation Board is the finding that decedent's death would not have occurred except for a pre-existing permanent physical impairment.

Liberty Mutual, the insurance carrier, paid the sum of $5,080 benefits for 104 weeks and, in addition, benefits in the amount of $12,870, for which latter sum Special Disability Fund has reimbursed Liberty Mutual. The order appealed from provides for payment to Liberty Mutual of $5,080, but makes no provision for reimbursement of the sum paid by Special Disability Fund.

The recovery herein is within the ambit of section 29 of the Workmen's Compensation Law. (Matter of Parchefsky v. Kroll Bros., 267 N. Y. 410; Matter of Zirpola v. Casselman, Inc., 237 N. Y. 367.) The entire court holds the lien of Liberty Mutual is valid. Plaintiff, however, contends Special Disability Fund is not a lienor within subdivision 1 of section 29 of the Workmen's Compensation Law. Matter of Dougherty v. Quackenbush Co. (10 A.D.2d 125); Matter of Constant v. Constant Spray Painting Co. (10 A.D.2d 750) and Matter of Bowdring v. Superior House & Window Cleaning (10 A.D.2d 751), cited by plaintiff, decided issues between the carrier and the Fund; they did not involve the lien or subrogation rights vis-a-vis the claimant and the Fund.

Section 29 enables an employee, or his dependents in case of his death, to take compensation or benefits under the act and prosecute a third-party action. "In such case, the state insurance fund, if compensation be payable therefrom, and otherwise the person, association, corporation or insurance carrier liable for the payment of such compensation, as the case may be, shall have a lien on the proceeds of any recovery from such other * * * to the extent of the total amount of compensation awarded under or provided or estimated by this chapter for such case * * * and to such extent such recovery shall be deemed for the benefit of such fund, person, association, corporation or carrier."

Plaintiff argues, and we agree, that the section 29 lien is limited to the one "liable for the payment".

Subdivision 8 of section 15 was first enacted in 1944 (L. 1944, ch. 749). Its relevant provision then was: "(2) If the subsequent injury resulting from an accidental injury or occupational disease shall result in the death of the employee and it shall be determined that either the injury or death would not have occurred except for the pre-existing disability, the employer shall be liable * * * for the death benefits provided in section sixteen of this chapter for the period of one hundred and four weeks, and such special fund shall be liable for the death benefits thereafter." (Emphasis supplied.)

Chapter 749 of the Laws of 1944 also made provision for compensation for a disabling occupational injury aggravating a prior disability not connected with the employment. In such case a dual award was to be made -- against the employer or his carrier for the employment-connected disability, disregarding the prior disability, and against the Special Fund for any additional disability. The provision for an award relative to employment-connected disability aggravating a prior non-employment disability gave rise to medical controversies and delays in benefit payments. The report of the Vice Chairman of the Industrial Board submitted to Governor Dewey on January 22, 1945 stated in part (1945 Public Papers of Thomas E. Dewey, pp. 30, 32): "Controversy in workmen's compensation claims is probably the most important factor in delaying benefit payments. Of course, controversy can never be wholly eliminated * * * The new second-injury legislation, intended to stimulate the employment of war veterans and other physically handicapped workers, calls for allocation of each award as between the employer and the Special Fund, and this allocation is dependent on the medical evidence in each case in which the second-injury is established."

Chapter 872 of the Laws of 1945 presumably is responsive to the medical controversies and benefit delays adverted to in the said report to Governor Dewey. "Apparently recognizing the difficulties of proof required to demonstrate what portion of the disability is attributable to the second injury, the Legislature, by the present statute (L. 1947, ch. 431), has allocated the first 104 weeks of disability to the second injury, and directed that the payment of subsequent compensation be reimbursed out of the special fund." (Matter of Mastrodonato v. Pfaudler Co., 307 N. Y. 592, 596.)

The present subdivision 8 provides generally that in second-injury cases, awards in excess of 104 weeks shall be paid from the Special Disability Fund. In so providing, the Legislature did not follow the language of the 1944 statute. The 1945 statute provides the "insurance carrier shall be reimbursed from the special disability fund created by this subdivision for all death benefits payable in excess of one hundred four weeks." Thereon, plaintiff ...


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