Trombetta v Eklecco Newco, LLC
Attorneys and Parties
Brief Summary
Insurance subrogation and personal injury settlement allocation—specifically whether a carrier that paid short-term disability benefits may enforce a lien against a plaintiff's tort settlement under General Obligations Law § 5-335 [anti-subrogation statute conclusively presuming personal injury settlements do not include insured health-care costs, lost earnings, or other economic loss and barring insurer liens or reimbursement claims, subject to listed exceptions].
The Supreme Court held that ShelterPoint's lien for short-term disability benefits was invalid and unenforceable because General Obligations Law § 5-335 barred the lien and the workers' compensation exception did not extend to article 9 disability benefits.
Nothing was overturned; the Appellate Division affirmed the order invalidating the lien.
The court held that Workers' Compensation Law § 227 [gives a disability-benefits carrier a lien on proceeds of a third-party recovery to the extent of disability benefits paid] did not help ShelterPoint because the settlement was not for lost wages and therefore was not deemed for the carrier's benefit, and, in any event, General Obligations Law § 5-335 bars subrogation for short-term disability benefits because they are distinct from workers' compensation benefits and are not within the statute's exceptions.
Background
Michele Trombetta was injured in a slip-and-fall accident in defendants' parking lot while off duty from his job at Enzo's of Arthur Avenue. Because he could not work, he received $2,346 in short-term disability benefits provided by his employer and underwritten by ShelterPoint Life Insurance Company. Trombetta sued the defendants for personal injuries and later settled the case for $125,000. ShelterPoint asserted a lien against the settlement proceeds seeking reimbursement of the disability payments.
Lower Court Decision
The Supreme Court, Rockland County, granted Trombetta's motion to declare the lien invalid and unenforceable. It concluded that General Obligations Law § 5-335 barred the lien, that the statute's exception for workers' compensation benefits did not include article 9 short-term disability benefits, and that ShelterPoint therefore had no enforceable reimbursement right against the settlement.
Appellate Division Reversal
No reversal occurred. The Appellate Division affirmed. It first held that even under Workers' Compensation Law § 227, a disability carrier's lien is limited to recovery proceeds that can be deemed for the carrier's benefit, such as amounts compensating lost earnings, and the record showed Trombetta sought and received only pain-and-suffering damages. The court further held that General Obligations Law § 5-335 independently barred ShelterPoint's lien because short-term disability benefits are separate from workers' compensation benefits, and the statute's exceptions cover workers' compensation, Medicare, Medicaid, and no-fault reimbursement rights, but not short-term disability benefits.
Legal Significance
This decision squarely holds that in New York, a carrier paying short-term disability benefits cannot use a personal injury settlement to recoup those payments through subrogation unless the recovery is actually for lost wages and can be deemed for the carrier's benefit under Workers' Compensation Law § 227. It also clarifies that the workers' compensation exception in General Obligations Law § 5-335 does not extend to article 9 disability benefits. The court relied on the statutory text, the distinct history and purpose of disability benefits versus workers' compensation, and the legislative history of the 2013 amendment to General Obligations Law § 5-335, including its response to litigation over Employee Retirement Income Security Act of 1974 (ERISA) preemption.
A New York personal injury settlement cannot be tapped by a short-term disability insurer for reimbursement merely because the insurer paid wage-replacement benefits; unless the settlement includes lost wages and falls within a recognized statutory exception, General Obligations Law § 5-335 bars the lien.