State News : New Jersey

Consider this situation:  Company A voluntarily pays approximately $172,000 in medical and temporary disability benefits to Worker.  Company A demands reimbursement from Company B believing that Company B is the true employer.  Worker never files a claim petition against Company A or B.  Can Company A file a claim petition in the name of Worker and recover from Company B all $172,000 that Company A voluntarily paid?            

That is the issue in Diocese of Metuchen, a/s/o/ Elissa Martinez v. Sisters of the Immaculate Heart of Mary, A-1441-14T4 (App. Div. Sept. 6, 2016).  It is the most interesting decision in many decades to come out of New Jersey on the right of a company to seek reimbursement from another company in a non-PIP situation through the Division of Workers’ Compensation.

Elissa Martinez was severely burned in the face, neck and torso while working as a cook at the convent of the Sisters of the Immaculate Heart of Mary (IHM).  The convent, a high school, and an elementary school are part of the Immaculate Conception Church, all owned by the Diocese of Metuchen.  Martinez was hired by the Mother Superior of IHM to cook for a net wage of $175 per week by checks issued by IHM.  The Mother Superior directed the activities of Martinez.  IHM issued a W-2 tax form to Martinez but clearly believed that Martinez was an employee of the Diocese.

The financial relationship of the Sisters at IHM and the Diocese is unusual because the sisters take a vow of poverty.  Hence, no individual sister receives a check.  However, the Diocese pays a stipend for each sister to IHM, which then allocates an amount per month to the sisters of the convent for their living expenses.  An extra stipend of $600 per month also was paid to IHM by the high school and the elementary school.  This stipend, however, was stopped after the accident to Martinez.

After Martinez’s accident, IHM notified its workers’ compensation carrier and the Diocese.  The Diocese paid Martinez’s medical and temporary disability benefits on a “charitable basis.”  Thereafter the Diocese demanded that IHM’s workers’ compensation carrier immediately assume responsibility for making all payments.  When that did not happen, the Diocese filed a workers’ compensation claim on Martinez’s behalf underN.J.S.A. 34:15-15.1  The Diocese denied that Martinez was its employee, and IHM also denied that Martinez was its employee.

As part of the claim petition which the Diocese filed, a motion was also filed to require IHM’s carrier to accept the claim and pay benefits.  The medical provider, St. Barnabas Medical Center, also intervened seeking repayment of $399,017 for in-patient hospital services paid to Martinez.  The Judge of Compensation heard testimony and ordered IHM’s carrier to reimburse the Diocese and pay outstanding medical bills, as well as make payment of $50,000 for counsel fees and pay permanent disability benefits to Martinez.  It is important to note that Martinez herself never filed a claim petition in this case.

The first issue which IHM raised was jurisdiction of the court to hear this case.  The Appellate Division agreed with the Judge of Compensation that the Division had jurisdiction to handle a claim filed by one entity on behalf of a petitioner for reimbursement of benefits.  That conclusion flowed from N.J.S.A. 34:15-15.1 which allows claims for reimbursement to be filed when benefits “have been paid by any person, organization or corporation on behalf of such petitioner.”  This provision is a little known part of the New Jersey Workers’ Compensation Act:

Whenever the expenses of medical, surgical or hospital services, to which the petitioner would be entitled to reimbursement, if such petitioner had paid the same as provided in section 34:15-15 of the Revised Statutes, shall have been paid by any insurance company or other organization by virtue of any insurance policy, contract or agreement which may have been procured by or on behalf of such petitioner, or shall have been paid by any person, organization or corporation on behalf of such petitioner, the deputy directors or referees of the Division of Workmen’s Compensation are authorized to incorporate in any award, order or approval of settlement, an order requiring the employer or his insurance carrier to reimburse such insurance company, corporation, person or organization in the amount of such medical, surgical or hospital services so paid on behalf of such petitioner.

The Appellate Division distinguished this sort of petition for reimbursement from a claim for contribution by one employer against the other, saying contribution claims like this are prohibited under the case of Conway v. Mr. Softee, Inc., 51 N.J. 254, 258 (1968).  The difference in this case was, according to the Appellate Division, that “the Diocese did not file a claim on its own behalf, but rather, as permitted by the statute, filed the claim on behalf of Martinez.” The Court said, “The claim in Conway was for contribution from the other employer, where the present claim is on behalf of the employee for reimbursement.”  In Conway, one employer tried to file a claim against another employer, and the Court said that cannot be done in the Division of Workers’ Compensation.

The next issue that the Appellate Division decided concerned employment by IHM.   It recited the two tests for employment, namely the “control” test, and the “relative nature of the work” test, and under both tests the Court found Martinez was an employee of IHM.   The decision does not make clear whether IHM argued that the Diocese was a “joint employer.”  Presumably that argument was advanced, but one cannot tell from the Appellate Division decision.  Control was established by the Mother Superior providing direction to Martinez.  The relative nature of the work test was met because Martinez cooked daily meals for the sisters in the convent and worked exclusively for the sisters in the convent.  She had no written agreement with the Diocese.

IHM also challenged the counsel fee award of $50,000.  For one thing, IHM argued that $50,000 constituted more than 20% of the award.  The Court noted that the Diocese had paid $172,182 as of January 13, 2015, and St. Barnabas had a claim for $399,017.  The Court said, that an award of $50,000 was far less than twenty percent of the combined amount paid by the Diocese and the amount owed to St. Barnabas.

Interestingly, the Appellate Division reversed an award of permanency to Martinez because Martinez never filed a claim petition and the Judge never explained the basis for the award.

This case is one of a kind, and there are really no other non-PIP cases like it that have been reported.  It is somewhat astonishing because the Diocese volunteered initially to pay medical bills without any court order or claim petition having been filed.  Yet the Diocese managed to obtain full reimbursement after paying $172,182 on a charitable basis by resort to filing a claim petition on behalf of the petitioner pursuant to N.J.S.A.34:15-15.1.   The language that the court focused on would suggest that employers can utilize this procedure rather easily: the standard set forth in the statute is  whether the petitioner would have been entitled to reimbursement had petitioner made the payments herself.  

Until this case, this particular statute has been used almost exclusively by PIP carriers to obtain reimbursement for medical bills and temporary disability benefits that PIP is required to pay under contract with rights over against the workers’ compensation carrier for injuries arising out of and in the course of employment. Based on this case, this statute now has a much wider potential use than just PIP reimbursement actions.

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John H. Geaney, Esq., is an Executive Committee Member and a Shareholder 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.