Workers’ Compensation Recipients Not Required To Reimburse Employer From Settlement Proceeds Allocated To Pain And Suffering

Employees who receive workers’ compensation benefits may not sue their employers in tort.  G.L. c. 152 Sec. 24.  Employees may, however, file claims against third parties.  G.L. c. 152 Sec. 15.  If the employee recovers damages from the third party, the employer is entitled to a statutory lien on the recovery, unless the recovery is greater than the amount the insurer paid the employee.  In that case, the employee may keep the “excess,” which is defined as “the amount by which the gross sum received in payment for the injury exceeds the compensation paid under this chapter.”

In DiCarlo v. Suffolk Construction Co., decided by the SJC on Friday, an employer who had paid out workers’ compensation benefits to an injured employee was seeking a portion of the “pain and suffering” damages the employee received from a subcontractor whom the employee had sued in tort.  The damages arose from a settlement agreement.  The employee agreed to accept less money from the third party than he had received in total from the employer in workers’ compensation benefits, but the agreement specifically allocated a percentage of the payout to pain and suffering.  The employer argued that pain and suffering damages should be included in its lien.  The employer took the position that the “gross sum received in payment for the injury” included pain and suffering.

However, the SJC allowed the settlement agreement to carve out pain and suffering damages for the benefit of the employee.  The court held that the workers’ compensation statute does not allow an employer to be “reimbursed” for pain and suffering damages, because an employee cannot recover for pain and suffering under the workers’ compensation statute – only for wages.  The court clarified that an insurer “cannot be reimbursed for something that it did not pay.”  The decision can be read here.