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Workers’ Comp Lien Applies Even if PIP Benefits Are Not Recoverable Against Tortfeasor

By on August 16, 2016 in Controlling Costs with 0 Comments

On January 13, 2011, Paulette Dorflaufer was hit by a car while working as a part-time crossing guard for Livingston Township.  She filed a workers’ compensation claim and filed a negligence law suit against the tortfeasor.  She settled that case for $95,000 for pain and suffering.  PMA Management Corporation put plaintiff on notice of its workers’ compensation lien in the amount of $46,856.22 for medical expenses paid on her workers’ compensation claim.

Plaintiff refused to reimburse PMA for the statutory lien amount.  She argued that she should only have to reimburse the amount paid for temporary disability benefits.  Her position on the medical benefits was that they were not payable from her third-party tort action and therefore should not be reimbursed to PMA.

Both parties sought a declaratory judgment in the Law Division. On November 17, 2014, the Superior Court denied plaintiff’s motion and granted PMA its lien on the medical expenses.  The court based its opinion on N.J.S.A. 34:15-40, which states that any sum the plaintiff should recover from a third party settlement is subject to a lien.  The court reasoned, “There is nothing in the statute that says it matters what the settlement was specifically compensating the plaintiff for or whether the plaintiff recovered full damages from it.”

On appeal, plaintiff argued that reimbursing PMA for its lien violates the Automobile Reparation Reform Act, N.J.S.A. 39:6A-1 to -35.  She contended that “since personal injury protection medical payments are not recoverable from the tortfeasor, a workers’ compensation carrier should not be able to recover medical expenses that it paid arising from an employee’s automobile accident.”  The Appellate Division disagreed for the following reasons:

In circumstances where an employee is injured in a work-related automobile accident, the collateral source rule of N.J.S.A. 39:6A-6 places the primary burden of paying the employee’s medical expenses through workers’ compensation. Lefkin v. Venturini, 229 N.J. Super. 1, 9 (App. Div. 1988).  Even where workers’ compensation benefits were not applied for by the employee, but would have been available, the statute provides that the PIP carrier may apply to the provider of workers’ compensation benefits for reimbursement of any benefits that the workers’ compensation carrier would have otherwise paid.

We are convinced that, based upon the plain language of Section 40, there is no bar to a workers’ compensation lien for reimbursement of medical expenses from an employee’s settlement in a third-party automobile negligence action.  There is nothing in Section 40 that prevents a lien from applying where the settlement represents payment for pain and suffering.  The fact that PIP benefits are not recoverable against a tortfeasor has no bearing on an employer’s Section 40 lien rights. 

This case may be found at Dorflaufer v. PMA Management Corp., A-1727-14T3 (App. Div. August 9, 2016).  This decision came one week after an appellate decision in Donatello v. Qual-Lynx, A-3643-14T4 (App. Div. August 2, 2016).  That case involved virtually the same facts and arguments, with a different appellate panel ruling once again that medical expenses were properly included in a workers’ compensation lien.  The injured worker also recovered in a third party action arising from a car accident and made the very same unsuccessful arguments that medical expenses and income continuation benefits in the third party action should be excluded from the workers’ compensation lien.  The Appellate Division agreed for the same reasons stated in Dorflaufer.

These two cases along with the recently published decision in Talmadge v. Burn, No. A-3160-14 (App. Div. June 22, 2016) make clear that Dever v. New Jersey Manufacturers. Ins. Co., No. A-3102-11T2 (App. Div. October 23, 2013) is bad law.  Section 40 is a powerful statute which has a dominant policy of avoiding double recoveries.

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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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