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Plaintiff Cannot Extinguish Section 40 Lien Rights By Setting Arbitrary Dates To Provide Lien Amounts

By on March 11, 2016 in Uncategorized with 0 Comments

The case of Cabrera v. Cousins Supermarket, A-5287-13T1 (App. Div. February 23, 2016) covers a point not previously addressed under N.J.S.A. 34:15-40, the provision dealing with the employer’s subrogation rights to third party recoveries.

Jose Cabrera injured his right hand while operating a meat perforating machine and recovered workers’ compensation benefits under an order approving settlement in 2010.  He received both temporary and permanent disability benefits.

Cabrera also brought a civil complaint against the manufacturer of the machine and his employer, but the arbitrator found no liability.  However, pursuant to a “high/low” agreement, Cabrera did recover counsel fees of $25,000. Those fees went to his attorney and to cover costs, but nothing went to Cabrera.

In May 2012, Cabrera issued a subpoena on Amerihealth Casualty, his health insurance carrier, to find out the amount of medical bills paid on his behalf in relation to the work injury.  Cabrera asked if Amerihealth Casualty was asserting lien rights.  Amerihealth did not respond to the subpoena.  Three months later (just prior to the arbitration) Cabrera contacted Cousins’s counsel with a request that counsel call Amerihealth to obtain the lien number.  Cousins was not informed of the impending arbitration.  The next day, Cabrera advised Cousins that he would not be honoring any lien because the lien amount had not been provided to Cabrera.  Cousins responded that it was not waiving any lien.  One day after the arbitration, the lien figures were provided to Cabrera.

Cousins filed a motion to enforce the lien under N.J.S.A. 34:15-40, arguing that there can be no waiver of lien rights where the plaintiff is already aware of the existence of a lien.  Cabrera countered that he did not get any money at all from the third party case, so there could not be a Section 40 lien.  The Appellate Division disagreed: “When a plaintiff recovers from a third party, a lien attaches regardless of whether the cumulative awards are sufficient to fully compensate for all injuries.” (citing to Frazier v. N.J. Mfrs. Ins. Co., 142 N.J. 590 (1995).

The Court specifically rejected the notion that a plaintiff can avoid a workers’ compensation lien by making a demand for specific lien information and putting a deadline on supplying the lien figures.  “As to the waiver of the right to assert a lien, we do not find the argument has sufficient merit to warrant discussion in a written opinion.”   The Court added that there are sometimes risks to bringing a third party action.  “The decision to pursue a third-party action with its attendant costs is a known risk, one that is part and parcel to litigation.”

This case is interesting for two reasons:  the plaintiff got no money at all from the third party case, but the award of counsel fees was considered a double recovery.  Secondly, plaintiff’s ploy in setting a deadline to provide lien information was rejected by both the Judge of Compensation and the Appellate Division.  While it is true that the respondent was not aware of the pending arbitration hearing when the subpoena was served, the key to the decision is that Cabrera was aware of the potential lien and that was enough to establish the lien rights of the employer.

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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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