05/19/2009 04:29:52 PM EST
Thomas A. Robinson on Ability of Claimant to Assign Disability Benefits to Third Party: Cross v. Capital Transaction Group, Inc.
Thomas A. Robinson says that we have all seen the television ads: "You need your money and you need it now" or "It's your money, use it now!" The ads target persons who receive periodic payments through an annuity, structured settlement agreement, or the like, and offer the opportunity to immediately swap that drawn-out flow of funds for a lump sum figure. These contractual arrangements are possible in a number of different contexts because the ownership right to the revenue flow is a property right, and such rights may generally be bargained and sold. Robinson states that such is not the case in the workers’ compensation field. “Many injured workers (and even some attorneys) are surprised that the same rules do not generally apply in the workers' compensation area. As harsh as it may sound, one's right to weekly disability benefits under the workers' compensation scheme is not a ‘property’ right, as such. Without specific statutory provisions requiring a different result (a number of states have such provisions), when, for example, a worker who has been awarded, say, 312 weeks of benefits for loss of an arm dies at the end of 12 weeks, his or her heirs generally do not inherit the remaining unpaid benefits.”
Robinson explains that the difference in those rights associated with a workers' compensation claim has other important implications. “At common law, one was generally free to bargain and sell his or her interest in a tort lawsuit to anyone willing to take the risk of recovery. In contrast, however, the vast majority of American jurisdictions severely restrict the ability of a workers' compensation claimant to sell, transfer, or otherwise assign his or her right to disability benefits.” The right to receive a lump-sum recovery after the Industrial Commission or Board has passed on the merits of the case is limited by provisions in most state Workers' Compensation Acts. Lump sum payments must generally be approved by the workers' compensation Commission or Board, Robinson states. “The rationale: just as some discounted portion of a person's lifetime wages are not handed to the worker at the beginning of his or her work life, but rather parsed out over the worker's active employment years, workers' compensation disability benefits--because they replace wages--should similarly be paid periodically.”
These issues are presented, with a bit of a twist, in Cross v. Capital Transaction Group, Inc., 661 S.E.2d 778, 2008 N.C. App. LEXIS 1150 (June 17, 2008), where the North Carolina Court of Appeals reversed the trial court's ruling that had declared an assignee of an "investment" contract to be the holder of a valid lien on a portion of a workers' compensation claimant's disability benefits. Robinson explains in this article while the decision is significant. “Holding that N.C. Gen. Stat. § 97-21 prohibits the assignment of an injured worker's rights to workers' compensation benefits and, therefore, that a ‘purchaser’ of those rights was no more than a creditor of the worker, the court struck a blow at attempts by financial firms and workers' compensation claimants who seek to circumvent the essential nature of an order allowing disability benefits.”
Robinson analyzes the case, reviews the rule in effect in most states that bars virtually all attempts to sell or otherwise transfer the worker's rights in his or her workers' compensation proceeds, and observes that, except for specific types of debts, such as child or spousal support, workers' compensation benefits are immune from the claims of creditors, even when those rights are transferred in an arms-length transaction by the workers' compensation claimant.
To read Robinson's additional comments and practice points on this topic, see his expert commentary article.