Appellate Court Rules Employer Has Subrogation Rights in Three Key Cases
Three cases were heard together in the New Jersey Appellate Division regarding the right of employers to obtain reimbursement under N.J.S.A. 34:15-40 in situations involving car accidents where medical treatment was potentially recoverable under PIP. The cases are Lambert v. Travelers Indemnity Company of America, Reed v. Qual-Lynx and Township of Marlboro, and Agar v. Qual-Lynx and Township of Hazlet, App. Div. A-1073-14T3, A-3040-14T1, A-3071-14T1 (App. Div. August 24, 2016).
The first case involved Jennifer Lambert who worked for the Howell Township Board of Education as a school bus aide. She was injured in a work-related car accident. Travelers Insurance Company paid $94,705.22 for medical expenses and $54,695.87 for indemnity benefits. Lambert sued the other driver and recovered $300,000. Her lawyer refused to reimburse Travelers anything for medical expenses but agreed to reimburse two thirds of indemnity benefits.
The second case involved Paul Reed, who worked for the Township of Marlboro as a police officer. Reed was redirecting traffic during work when he was struck by a vehicle. Marlboro belonged to the Monmouth Municipal Joint Insurance Fund and its third party administrator, Qual-Lynx, paid $60,430.48 for medical expenses and $44,578.29 for indemnity benefits. Reed recovered $100,000 in his third party law suit. Counsel for Reed offered to reimburse the JIF two thirds of indemnity benefits but refused to reimburse any medical expenses.
The third case involved William Agar, who worked as a police officer for the Township of Hazlet. Officer Agar was injured on June 26, 2011 while sitting in his police car, which was struck by another vehicle. The Township of Hazlet also belonged to the Monmouth County Municipal Joint Insurance Fund and the JIF paid $4,331.02 for medical expenses and $15,693 for indemnity benefits. Agar recovered $60,000 in his third party law suit and refused to reimburse any of the medical expenses.
All three cases went before the same Judge of the Superior Court, who ruled based on the unreported Dever decision that the plaintiff injured workers did not have to reimburse the portion of the workers’ compensation lien corresponding to medical expenses. The Superior Court Judge concluded that since a no-fault insured cannot make a recovery from a third party tortfeasor for medical expenses, the workers’ compensation carrier could not seek reimbursement under N.J.S.A. 34:15-40.
The Appellate Division reversed in all three cases and said that the Automobile Insurance Cost Reduction Act (AICRA) did not negate the right of employers to subrogation of medical expenses. The Court explained that the way N.J.S.A. 39:6A-6 of AICRA works is that workers’ compensation becomes the primary payor in a work-related car accident. The PIP carrier must pay initially by contract but ultimately the workers’ compensation carrier must reimburse the PIP carrier. “N.J.S.A. 39:6A-6 ‘relieves the PIP carrier from the obligation of making payments for expenses incurred by the insured [, including medical expenses] which are covered by workers’ compensation benefits.” The Court also noted that workers’ compensation benefits “shall be deducted from the benefits collectible under [PIP].”
The Court added, “The collateral source rule does not make workers’ compensation part of the PIP no-fault system; rather it shifts the burden of providing insurance from the automobile insurance system to the workers’ compensation system.” The Court concluded, “. . . nothing in that statutory language suggests that the Legislature intended to treat a workers’ compensation insurer as if it were an automobile insurer.” The Court added, “Nor is there any suggestion that the Legislature intended to treat workers’ compensation insurers as if they were PIP insurers. It is fair to assume that had the Legislature intended to effectuate such a major change, it would have used express language in the statute and discussed that incorporation in AICRA’s legislative history.”
These cases make clear that the unreported decision in Dever is bad law insofar as its ruling on subrogation. These three decisions have been reported and should end the controversy over recent years about whether a work-related plaintiff injured in a car accident must reimburse the employer for medical expenses when a third party recovery is made.
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