State of Connecticut Workers' Compensation Commission, Stephen M. Morelli, Chairman
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Petraroia v. City News & Tobacco

CASE NO. 2211 CRB-5-94-11



JUNE 14, 1996














The claimant was represented by Edward T. Dodd, Jr., Esq., Dodd, Lessack, Ranando & Dalton, L.L.C., 700 West Johnson Ave., Cheshire, CT 06410.

Respondents were represented by Douglas Drayton, Esq., Pomeranz, Drayton & Stabnick, 95 Glastonbury Blvd., Glastonbury, CT 06033 who did not submit a brief or appear at oral argument.

The Second Injury Fund was represented by Taka Iwashita, Esq., Assistant Attorney General, 55 Elm St., P. O. Box 120, Hartford, CT 06141-0120.

This Petition for Review from the November 9, 1994 Finding and Award of the Commissioner acting for the Fifth District was heard August 25, 1995 before a Compensation Review Board panel consisting of the Commission Chairman Jesse M. Frankl and Commissioners Roberta Smith Tracy and Michael S. Miles.


JESSE M. FRANKL, CHAIRMAN. The claimant has petitioned for review from the November 9, 1994 Finding and Award of the Commissioner acting for the Fifth District. She argues on appeal that the trial commissioner erroneously concluded that the Second Injury Fund was entitled to a $25,000 credit against future compensation benefits payable to the claimant from the Fund. We affirm the trial commissioner’s decision in part, but also remand the matter back to the trial commissioner to consider modifying the transfer order under § 31-315 C.G.S.

The commissioner found the following stipulated facts: the claimant’s June 18, 1985 compensable injury to the cervical spine, left shoulder and right hip is subject to a voluntary agreement approved in 1986. The claimant also brought a third party claim as a result of this incident, in which suit the respondent employer intervened. On July 13, 1989, a Superior Court judge approved a stipulated judgment for $75,000 against the third party, which was split evenly three ways between the claimant, her attorney, and the respondent employer. The $25,000 received by the employer was in full satisfaction of its workers’ compensation lien of $43,500; however, the stipulated judgment provided that the employer would have no future credit regarding workers’ compensation benefits, nor would a moratorium be applicable.

The Second Injury Fund was notified of its potential liability for the claimant’s injury in 1987, as the claimant had a pre-existing cervical condition. However, this case was not ripe for transfer to the Second Injury Fund at the time of the stipulated judgment, as the 104th week of benefits was not paid until November 17, 1989. The Second Injury Fund was not made a party to the third party action, did not receive notice of that action, and did not agree to the stipulated judgment in any way. The case was transferred to the Fund as of November 18, 1989. The claimant contended at the formal hearing that she is entitled to benefits subsequent to the transfer date, while the Fund argued that it is entitled to a $25,000 credit against those benefits.

Noting that the Fund was not shown to be aware of the third party action, and that the agreement to transfer the case to the Fund made no mention of the terms of the stipulated judgment, the trial commissioner concluded that the stipulated judgment was not binding on the Second Injury Fund. He reasoned that the judgment should be construed as a voluntary agreement under Welch v. Arthur A. Fogarty, Inc., 157 Conn. 538 (1969), requiring approval of a commissioner before it could become effective with respect to waiver of a credit. Furthermore, §§ 31-293 and 31-352 C.G.S. required the Fund to assent to the third party compromise before it could take effect. Thus, the commissioner concluded that the Fund was entitled to a $25,000 credit against future compensation benefits due the claimant. The claimant has appealed from that decision.

At the time of the claimant’s injury, § 31-293 provided that when a compensable injury has been sustained under circumstances creating liability for damages in a third party, the injured employee may sue that third party for damages,

“and any employer having paid, or having become obligated to pay, compensation under the provisions of this chapter may bring an action against such other person to recover any amount that he has paid or has become obligated to pay as compensation to such injured employee. . . . If such employer and employee join as parties plaintiff in such action and any damages are recovered, such damages shall be so apportioned that the claim of the employer, as defined in this section, shall take precedence over that of the injured employee in the proceeds of such recovery. . . . The rendition of a judgment in favor of the employee or the employer shall not terminate the employer’s obligation to make further compensation, including medical expenses, which the compensation commissioner thereafter deems payable to such injured employee. If the damages, after deducting the employee’s expenses as provided above, are more than sufficient to reimburse the employer, . . . the excess shall be assessed in favor of the injured employee. No compromise with such third person by either employer or employee shall be binding upon or affect the rights of the other, unless assented to by him. For the purposes of this section, the employer’s claim shall consist of (1) the amount of any compensation which he has paid on account of the injury which is the subject of the suit and (2) an amount equal to the present worth of any probable future payments which he has by award become obligated to pay on account of such injury.”

The effect of this provision is augmented by § 31-352 C.G.S., which provides that § 31-293 “shall apply to any payments from the Second Injury Fund and the treasurer is authorized to bring an action, or join in an action as provided by said section, when he has paid, or by award has become obligated to pay, compensation out of the fund.”

The claimant argues that these statutes do not apply to the Fund in this case. At the time she and the employer entered into the stipulation, the Fund had not yet become liable under § 31-349 C.G.S. because 104 weeks of benefits had not yet been paid by the employer. The claimant accordingly argues that the Fund had not “paid or become obligated to pay compensation” within the meaning of § 31-352, and that it would not have had standing to intervene in the third party action. Thus, the Fund should not now be allowed to reconfigure the stipulation, as said judgment is binding and may be set aside only if fraud, accident or mistake is shown.

The express language of § 31-293 requires that notice of a third party action be provided to the employer by the employee if he brings suit, and to the employee by the employer if it brings suit. The Second Injury Fund is not mentioned in the statute. Although § 31-352 provides that § 31-293 shall apply to any payments from the Fund, we do not believe that it should be read to require notice of an action to be provided to the Fund before it has accrued any liability or made payment to a claimant.

We recognize that our Supreme Court held as early as 1918 that an employer may join an employee’s third party action before he has by award become obligated to pay compensation. Rosenbaum v. Hartford News Co., 92 Conn. 398, 401 (1918). We are also aware that an employer has a continuing obligation to provide compensation for future benefits deemed payable by a commissioner, and that it may seek reimbursement for identifiable future benefits, along with a credit for unknown future benefits against the net proceeds of a third party recovery. Section 31-293; Enquist v. General Datacom, 218 Conn. 19, 25-27 (1991). Nonetheless, the fact that the Second Injury Fund might be entitled to the same relief once it steps into the employer’s shoes under § 31-349 does not entitle us to read into the statute a notice requirement for the Fund. Just as the employer and its workers’ compensation insurer are not equal for the purposes of intervention under § 31-293, see Johndrow v. State, 24 Conn. App. 719, 721 (1991), the Second Injury Fund does not occupy the same status as the employer before it has actually paid or become liable for compensation under § 31-352.

At the same time, however, the rights granted by § 31-352 to the Second Injury Fund must be protected in some fashion in order to remain meaningful. The trial commissioner is the individual best situated to do so in a case like this. Our Supreme Court contemplated in Love v. J. P. Stevens & Co., 218 Conn. 46 (1991), that the issue of an employer’s entitlement to a credit for a third party recovery is properly and necessarily delegated to the trial commissioner by the Workers’ Compensation Act. Id., 50-51; see also Welch, supra, 542. Under the holding in Welch, a stipulated judgment in a trial court between an employer and employee constitutes a voluntary agreement within the terms of § 31-296. Id. Such an agreement must be approved by a trial commissioner before it can be held effective against a nonparty to that agreement, such as the Second Injury Fund in this case. The agreement is also subject to modification by the commissioner under § 31-315 C.G.S, should the circumstances so require.

Here, the trial commissioner declined to enforce against the Second Injury Fund the provision in the stipulation waiving any credit against future benefits due the claimant, as the Fund had not assented to the waiver of credit. This decision was appropriate; to do otherwise would eviscerate the protection § 31-352 affords the Fund. The spirit of that statute would not be honored by allowing an employer to sign away the reimbursement rights of the Fund before its liability has come to fruition. Logically, the portion of § 31-293 prohibiting a third party compromise without the assent of both employer and employee should include the Fund as well, insofar as one attempts to make such a settlement binding on the Fund.

We observe, however, that the solution reached by the trial commissioner, i.e., a setoff of the claimant’s $25,000 award against compensation payable by the Fund, requires the claimant to absorb the full effect of the failed attempt at waiver. The employer is not directly affected by this decision. Although the claimant is not blameless in this scenario, as she should have sought the approval of the commissioner before attempting to apply the settlement agreement to the Fund, the employer is the party who actually benefits from the Fund’s involvement under § 31-349, as well as the one who tried to bargain away the Fund’s right to a credit for future benefits. We do not believe that the conduct of the employer warrants its retaining the full benefit of the settlement while the claimant loses the $25,000 credit she thought had been waived. If anything, we would expect the employer to have a greater awareness than the claimant of the rights and interests of the Fund. We thus hold that this matter should be remanded for consideration of a modification of the settlement agreement and transfer agreement as it applies to the Fund, based on changed conditions of fact pursuant to § 31-315. See Murphy v. West Haven, 2197 CRB-3-94-10 (decided Sept. 11, 1995).

Commissioners Roberta Smith Tracy and Michael S. Miles concur.

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