A Capehart Scatchard Blog

Section Twenty Settlements and Subrogation Rights

By on December 14, 2018 in Workers' Comp with 0 Comments

Section 20 settlements are not technically payments of workers’ compensation benefits except for insurance rating purposes.  These settlements are popular with employers because the file can be closed for good with no potential for a reopener claim.  In many states, the Section 20 settlement is called a full and final settlement.  But does a Section 20 settlement mean that the employer has no subrogation rights as to medical, temporary or permanency payments when the injured worker has a good third party case arising from the work accident?

It is important for practitioners to consider at the time of a Section 20 settlement whether there is a third party case pending.  If so, the issue arises whether the employer has a lien on medical and temporary disability benefits paid prior to the settlement.  Example:  suppose the employer pays $30,000 in medical and temporary disability benefits to a claimant, who has a good third party lawsuit which he will eventually settle for $100,000.  There are causation issues in the workers’ compensation case such that the parties agree to settle the permanency claim petition months later for $45,000 on a Section 20.  On the day of settlement, no one mentions anything about the prior payments of $30,000 for medical and temporary benefits.  The Judge of Compensation approves the Section 20 settlement for $45,000.  A few days later the third party case settles for $100,000, and the employer requests reimbursement of two thirds of the $20,000 it has paid in medical and temporary disability benefits.

Does the claimant owe the employer $20,000 minus $750 in costs of suit?  The answer is yes, according to Aetna Life & Cas. v. Estate of Engard, 218 N.J. Super. 239 (Law Div. 1986).  The $45,000 payment under the Section 20 is not lienable, but the prior medical and temporary disability benefits made well before the case settled remain lienable.  Best practice would be to place all of this on the record so that the injured worker is well aware that only the $45,000 Section 20 payment will escape the respondent’s lien, not the prior medical and temporary disability benefits.

Suppose the defense attorney in the same case negotiated with the petitioner’s attorney to allow the $45,000 Section 20 payment to be lienable?  Can that be done in New Jersey when a Section 20 payment is not really a payment of workers’ compensation benefits?  Yes, according to Calle v. Hitachi Power Tools, No. A-1015-09T1 (App. Div. February 15, 2011).  This situation seldom happens in workers’ compensation court.  But the parties are free to negotiate the terms of a settlement whereby the petitioner agrees to permit a Section 20 payment to be lienable.  The Judge of Compensation must, of course, approve the entire settlement, including this aspect of the settlement.  The intention to make the Section 20 payment lienable should be placed on the actual court order and on the record, thereby making clear that respondent has a lien on the Section 20 payment itself.

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John H. Geaney

About the Author

About the Author:

John H. Geaney, an executive committee member and shareholder with Capehart Scatchard, 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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