KEY TAKEAWAYS

• A recent New York Court of Appeals decision has significant implications for municipal employers and workers’ compensation insurance carriers in New York

• Municipal employers should track GML § 207-a pre- and post-retirement benefits — especially for municipal employees receiving workers’ compensation benefits — and assert any reimbursement rights as they become available

• Municipal employers should strengthen their benefit administration process and communicate with both carriers and attorneys to ensure benefits are properly administered and their rights protected

The recent New York Court of Appeals decision in Matter of Schulze v. City of Newburgh Fire Department (April 10) has significant implications for municipal employers and workers’ compensation insurance carriers in New York, particularly regarding reimbursement rights for disability benefits paid to firefighters under General Municipal Law (GML) § 207-a. Below is a concise analysis of the key implications based on the ruling:

Background

The case involved Adam Schulze — a City of Newburgh firefighter injured on the job in 2012 — who received full salary payments under GML § 207-a(1) while on payroll and later supplemental benefits under GML § 207-a(2) after retirement due to his permanent partial disability. The City of Newburgh sought to recover these payments from Schulze’s workers’ compensation benefits for two periods: pre-retirement (2015–2016) and post-retirement (2016 onward). New York State’s highest court, the Court of Appeals, upheld lower rulings that allowed reimbursement only for pre-retirement § 207-a(1) payments, denying the city’s recovery efforts for post-retirement § 207-a(2) benefits.

Implications for Municipal Employers

• Limited Reimbursement Rights:

• • Municipal employers cannot recover post-retirement GML § 207-a(2) supplemental benefits from workers’ compensation awards when the firefighter is receiving performance-of-duty retirement benefits. The Court of Appeals clarified that the GML § 207-a(2) benefits paid to permanently disabled firefighters after retirement are not considered “wages” under Workers’ Compensation Law (WCL) §§ 25(4)(a) and 30(2), thus fall outside the scope of reimbursable payments.

• Need for Timely Administrative Action:

• • The ruling highlights the importance of promptly coordinating disability and workers’ compensation benefits. Municipalities must act swiftly to align benefits under the correct legal frameworks to avoid unrecoverable costs.

• • Indeed, the court noted: “In this case, the City could have avoided the overpayment by asking the [Workers’ Compensation Law Judge] to award workers’ compensation benefits beginning in April 2016, when Mr. Schulze retired. If the City had done so, it would have been entitled to reduce its General Municipal Law § 207-a(2) payments by the amount of workers’ compensation finally determined. Instead, the City allowed years to pass without an award of workers’ compensation, thereby running the risk that Mr. Schulze would later receive a retroactive award covering that period of time.  Having failed to avail itself of the proper remedy, the City now seeks to avail itself of a statutorily unavailable remedy.”

• Statutory Compliance:

• • Employers must adhere strictly to the statutory limits of GML § 207-a and WCL. Municipalities must structure their benefit administration to reflect these boundaries.

Implications for Workers’ Compensation Insurance Carriers

• Risk of Administrative Delays:

• • The case underscores the shared responsibility of carriers and municipalities to ensure timely processing of workers’ compensation claims. Delays, as seen in Schulze’s case (unpaid benefits from 2015–2016), can complicate reimbursement disputes and lead to legal challenges.  Municipal employers, carriers, and attorneys should prioritize efficient claim handling to mitigate risks and avoid possible overpayment scenarios.

Broader Context

• Financial Exposure: Municipalities and carriers face increased pressure to manage overlapping benefit systems (GML § 207-a and WCL) effectively. Failure to do so risks unrecoverable costs for employers and potential disputes with carriers.
• Policy Considerations: The ruling prioritizes protecting disabled firefighters’ benefits, reflecting the legislative intent of GML § 207-a to provide robust support.  However, it may prompt municipalities to lobby for legislative changes to allow broader reimbursement or to tighten administrative processes.

Recommendations

• For Municipal Employers: Implement robust systems to track and coordinate disability and workers’ compensation benefits. Legal counsel should review benefit payments to ensure compliance with GML § 207-a and WCL, and municipalities should act promptly to secure appropriate reimbursements or benefit payment reductions relating to post-retirement benefits.
• For Insurance Carriers: Strengthen claims processing to avoid delays that could lead to disputes with municipalities and/or create overpayments. Carriers and attorneys should also educate municipal clients on the limits of reimbursement and benefit payment reductions under GML § 207-a.

This decision reinforces strict statutory boundaries and underscores the need for proactive claims coordination between municipal employers and insurance carriers to manage financial and legal risks effectively.

If you have questions about how this impacts your business, please contact:

• Robert W. Clark
• Christopher P. Maugans
• Philip Unwin
• Damon M. Gruber
• Sean J. McKinley
• Scott R. Green
• Or another member of our Workers’ Compensation or Employment and Labor practice groups