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Accelerating Permanency Payments Where There Is a Large Third Party Award

By on September 11, 2015 in Uncategorized with 3 Comments

In the past month three clients have asked what they should do when there is a third party award larger than the comp award and the adjuster needs to pay a permanency award.  For example:  the claimant recovers $750,000 in a third party law suit.  The total medical and temporary disability benefits are $150,000, and the permanency award is 50% of partial total at 2013 rates or 300 weeks at $551 per week for a total of $165,300.  The claimant has already repaid $100,000 minus $750 for costs of suit to resolve the lien on the medical and temporary disability benefits. Now only the permanency award needs to be paid.  Does the adjuster pay the permanency award over 300 weeks or does the adjuster pay one lump sum to the claimant?

This situation happens quite frequently, and the answer to the question can be found in the case of Owens v. C&R Waste Material, 76 N.J. 584 (1977).  That case involved an award in workers’ compensation for total and permanent disability benefits; however, the third party recovery was higher than the total workers’ compensation payments.  The employer argued that the payments for permanency should be made over 450 weeks.  The employee argued that the adjuster should pay one third of the permanency amount due in one check.

First, the New Jersey Supreme Court made clear that in a situation where the third party award is larger than the total workers’ compensation benefits, the employer is relieved of all liability to the claimant, other than to pay the employer’s share of the attorney’s fee in the third party case.  That percentage is usually one third.  That point must be emphasized because it means that the employer is not really paying workers’ compensation benefits in this situation:  the employer is just reimbursing petitioner for counsel fees.

Next, the court dealt with the argument that it is unfair to require the employer to accelerate the permanency payments in one lump sum because the employee might die during the period of the payments of total and permanent disability.  The employer further argued that if the employee should die during the period of permanency payments and not be survived by dependents, then all the employer would have to pay is a contribution to funeral expenses.

The Supreme Court rejected the employer’s argument:

We disagree and conclude that the legislative intent as expressed in N.J.S.A. 34:15-40 is that the computation of the employer’s pro rata share of the attorney’s fee in the third party recovery should be based on the potential compensation liability from which it has been released and does not depend on the happenstance of whether such liability were to terminate prematurely.

The Court added, “Since the obtaining by the employer of this tangible benefit coincides with the third-party recovery, it follows that the obligation to share legal expenses attributable to that recovery should be satisfied at the same time those expenses are borne by the employee.”

So, let’s go back to the initial example above.  Does the employer pay $551 per week over 300 weeks reduced by two thirds or does it just issue one lump check in the amount of $55,100, which is  one third of $165,300?  Under the rationale of Owens, the answer is the employer pays one lump sum check for $55,100.  It does not make the payments over a period of 300 weeks.

While it is true that Owens was a claim for total and permanent disability, the rationale should be the same whether the award is for partial or total permanent disability.  The point is that the employer is not paying the employee workers’ compensation benefits.  It is reimbursing the employee for its share of counsel fees, and the Supreme Court felt that this should be done.

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John H. Geaney

About the Author

About the Author:

John H. Geaney, a shareholder and co-chair of Capehart Scatchard's Workers' Compensation department, began an email newsletter entitled Currents in Workers’ Compensation, ADA and FMLA in 2001 in order to keep clients and readers informed on leading developments in these three areas of law. Since that time he has written over 500 newsletter updates.

Mr. Geaney is the author of Geaney’s New Jersey Workers’ Compensation Manual for Practitioners, Adjusters & Employers. The manual is distributed by the New Jersey Institute for Continuing Legal Education (NJICLE). He also authored an ADA and FMLA manual as distributed by NJICLE. If you are interested in purchasing the manual, please contact NJICLE at 732-214-8500 or visit their website at www.njicle.com.

Mr. Geaney represents employers in the defense of workers’ compensation, ADA and FMLA matters. He is a Fellow of the College of Workers’ Compensation Lawyers of the American Bar Association and is certified by the Supreme Court of New Jersey as a workers’ compensation law attorney. He is one of two firm representatives to the National Workers’ Compensation Defense Network. He has served on the Executive Committee of Capehart Scatchard for over ten (10) years.

A graduate of Holy Cross College summa cum laude, Mr. Geaney obtained his law degree from Boston College Law School. He has been named a “Super Lawyer” by his peers and Law and Politics. He serves as Vice President of the Friends of MEND, the fundraising arm of a local charitable organization devoted to promoting affordable housing.

Capehart Scatchard is a full service law firm with offices in Mt. Laurel and Trenton, New Jersey. The firm represents employers and businesses in a wide variety of areas, including workers’ compensation, civil litigation, labor, environmental, business, estates and governmental affairs.

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  1. National and State-by-State Workers' Comp News Powered by Larson's (9/14/2015) | September 14, 2015
  1. Avatar Jason says:

    I will have been on NJ W/C for seven years this May. I suffer from a permanent injury called RSD and along with that comes mental issues I see a psycatrist for. I’ve also suffered two herniated discs in my lumbar spine as well. I have been receiving the 2009 W/C max biweekly benefit and it now makes me wonder if my biweekly benefit should be adjusted to the new 2015 rate? I made a good living making $80k a year so if my benefit should be readjusted to the new rate I’m sure this state wouldn’t automatically do it? Since I’ve been on the same paid biweekly benefit since I was injured almost seven years ago. Once I reach MMI whenever that is am I going to still be paid my biweekly benefit? And shouldn’t I receive a cash settlement as well? I’ve read different verdicts where this has happen where they continue the biweekly benefit since I am in the process of going through SSDI so returning to work isn’t looking well. Perhaps part time someday I hope.

    Am I correct with this since I will be permanently totally or partially disabled but my bet is totally disabled due to the RSD in my left arm and left leg. It’s very difficult to stand, walk, or sit for long periods of time especially due to my herniated discs.

  2. Avatar William says:

    I got awarded 46 wks accelerated payments ordered by the wc judge how long does it normally take for that payment to be issued to me by the adjuster

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