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We all know certain events are going to happen every year: Alabama is going to play for the national football championship, your property taxes will certainly rise, Tom Brady will be in the Super Bowl, and most likely of all – someone is going to challenge the way Section 40 liens are calculated in New Jersey. This year the lien challenge has already occurred in Panckeri v. Allentown Police Department, No. A-2015-19 (App. Div. March 2, 2021).
Police Officer Daniel Panckeri was injured on April 15, 2012 rendering assistance at the scene of a motor vehicle accident. While attempting to stop one of the cars that was rolling into oncoming traffic, Panckeri suffered injuries to his left foot that resulted in an award of thirty three and one third percent permanent disability. He reopened the case two years later and received an increase to forty percent of the foot.
Panckeri also settled a third party suit for $99,000 and respondent asserted its full lien for the gross amount of its workers’ compensation payments: $16,547.13 for temporary disability benefits, $16,287.05 in medical benefits, $16,560.01 in permanency benefits for the first settlement, and $4,323.09 for the reopener settlement. That meant that the Township was entitled to be reimbursed two thirds of all these payments minus $750 in costs because the third party settlement amount was higher than the total amount of workers’ compensation payments.
The issue in this case centered on the fees petitioner paid his attorney and whether they should be included in the lien. In the original workers’ compensation case the Judge of Compensation assessed against petitioner $1,524 for Panckeri’s share of counsel fees and costs and another $844 for Panckeri’s share of counsel fees and costs on the reopener claim. Panckeri argued that the workers’ compensation lien should not apply to his payments of counsel fees and costs on the two cases because he never received those funds. He argued they should be deducted before respondent calculates its lien.
The Judge of Compensation, Christopher B. Leitner, ruled in favor of the Allentown Police Department and held that there should be no reduction of $2,368 for the two combined awards of counsel fees and costs assessed against petitioner because the New Jersey statute does not sanction any such exception. The judge ruled that the statute is designed to avoid double recoveries, and the only cost allowance allowed by the statute is $750. Judge Leitner further observed that the Act is “silent’ with regard to costs incurred in the workers’ compensation matter by the petitioner. Finally, Judge Leitner observed that the Legislature amended N.J.S.A. 34:15-40 in 2007 to raise the cost allowance from $250 to $750 and specifically “examined exemptible fees and costs,” choosing “only to increase the deductible amount,” and “not to include any new interpretation.”
On appeal Panckeri argued that the attorneys’ fees and costs he paid in the workers’ compensation case were not made for his “benefit or enjoyment” and therefore were not “compensation payments.” The Appellate Division did not agree. “We affirm substantially for the reasons articulated by Judge of Compensation Christopher B. Leitner, in his thoughtful and thorough written decision.”
The Appellate Division observed that the case relied on by Panckeri, namely Kuhnel v. CNA Insurance Cos., 322 N.J. Super. 568 (App. Div. 1999) is not really on point. That case held that a Section 40 lien does not include rehabilitation nursing services in most cases and does not include the respondent’s portion of petitioner’s attorney’ fees nor expert fees for defense IMEs. The Court concluded that Kuhnel did not address at all whether petitioner can deduct his portion of fees and costs paid in the workers’ compensation case. Lastly, the Court said that the Legislature could have amended Section 40 in 2007 to make such an adjustment, but it chose not to do so.
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John H. Geaney, Esq., is a Shareholder and Co-Chair in Capehart Scatchard's Workers’ Compensation Group. Mr. Geaney concentrates his practice in the representation of employers, self-insured companies, third-party administrators, and insurance carriers in workers’ compensation, the Americans with Disabilities Act and Family and Medical Leave Act. Should you have any questions or would like more information, please contact Mr. Geaney at 856.914.2063 or by e‑mail at jgeaney@capehart.com.