On February 14, 2013, the New York Court of Appeals decided in Maria Auqui v. Seven Thirty One Limited Partnership, et al. that when a Workers’ Compensation Board (WCB) decision sets forth the date a worker’s disability ended, a trial court in a third-party lawsuit should not allow for any award for lost earnings and medical expenses after that disability end date.

The court held in Auqui that a WCB decision finding that the plaintiff was no longer disabled after a specific date was to be given a collateral estoppel effect in a third-party personal injury action brought by the guardian of the plaintiff.

Background

Mario Verdugo, the plaintiff in Auqui, was injured in 2003 when a sheet of plywood fell from a building and hit him, allegedly causing head and neck injuries. After two years of treatment, the workers’ compensation insurer was successful in obtaining a WCB decision that the plaintiff no longer suffered from any disability as of January 24, 2006. In 2009, the defendants in the personal injury action were successful in arguing the plaintiff was precluded from re-litigating the length of his disability with respect to lost earnings and compensation for medical expenses.

Analysis

This decision can be used favorably in many severe exposure personal injury cases, if there has been a WCB final determination on disability prior to trial. Specifically this decision is helpful in defending New York Labor Law cases in which liability may be almost certain, and the plaintiff alleges, for example, a traumatic brain injury (TBI) yet there was only limited medical treatment with no cognitive therapy or objective evidence (e.g., radiographic films) of brain damage. The exposure presented in such a case can exceed $5–$10 million, a large portion of which can be attributable to the alleged need for a lifetime of medical expenses, as testified to by a life care planner, and economic loss, including lost earnings that can exceed $100,000 a year based on union contract provisions. Therefore, in a case alleging a TBI, but where the WCB has issued a decision stating that any medical disability has ended, there is now the potential for a defendant to save several millions of dollars. In the alternative, the Auqui decision may convince a plaintiff’s counsel who is litigating such a case to consider a much more reasonable settlement demand than they would have considered otherwise.

The decision is explicitly limited to lost earnings and medical expenses, with the court stating that: “The determination of the WCB should be given preclusive effect as to the duration of plaintiff's disability, relevant to lost earnings and compensation for medical expenses.”

The decision is even more startling as the opinion admits that plaintiff Mario Verdugo actually has a guardian in place pursuant to New York’s Mental Hygiene law after he was shown in an administrative hearing to be incapable of handling his affairs without one. However, because only the plaintiff provided testimony at the hearing at which the guardianship was awarded (and the defendants were not a party to that hearing) the court found the guardianship irrelevant.

Potential Impact on Third-party Claims

The potential impact of this high court opinion will be complicated in cases where a plaintiff brings a personal injury suit against a defendant and the injuries meet the Workers’ Compensation section 29 “grave injury” standard, such that the defendant can implead the plaintiff’s employer, based on common law indemnity claims. (In NewYork, a plaintiff’s employer can only be impleaded into a personal injury case as a third party where contractual indemnity obligations are the basis for the claim, or the injured plaintiff has a statutorily defined grave injury (e.g., certain brain injuries).)

If the plaintiff claims, as in this case, that he has a head trauma/traumatic brain injury, yet the WCB finds only a temporary disability, the plaintiff would be precluded from obtaining an award of lost earnings and medical expenses after the disability period ended, as determined by the WCB.

However, in that same case, a defendant/third-party plaintiff will be seeking to prove (based on the plaintiff's allegations) that the plaintiff’s head injury/“grave injury” allows its third-party claims to proceed. In doing so, the defendant/third-party plaintiff will argue that the WCB decision that limits the plaintiff’s claim cannot be used against it to bar its third-party claims, as the defendant/third-party plaintiff was not a party to the plaintiff/employer WCB proceedings. Thus, this high court decision has effectively created a situation where there are two different legal tests a court will have to apply in the same case when a defendant is pursuing a third-party claim against the plaintiff’s employer.