State News : New Jersey

In Marano v. Clifford J. Schob, M.D., A-33915-16T2 (App. Div. June 20, 2018), the Appellate Division held that New Jersey’s lien provision does apply to funds that an injured worker received in a medical malpractice suit pursuant to the terms of a “high/low” agreement.  The case affirmed a prior ruling in Pool v. Morristown Memorial Hospital, 400 N.J. Super. 572 (App. Div. 2008) but dealt with a new regulation that was passed after the Pool decision.

The case stemmed from a work-related injury to a police officer employed by the Union Township Police Department.  The Township was a member of the Garden State Municipal Joint Insurance Fund (GSMJIF).  PMA was the third party insurance administrator for the GSMJIF.  Officer Marano injured his back on July 12, 2010 arising from work and received $51,779.81 in workers’ compensation benefits, including $5,403.07 for nurse case management charges.

Marano filed a suit in the law division alleging that Dr. Clifford Schob was negligent in failing to advise him to visit an emergency room and was negligent in not properly diagnosing his condition.  The parties to the medical malpractice suit agreed to arbitrate the suit with the agreement that following the arbitrator’s decision, plaintiff would receive at least $250,000 (the “low”) but no greater than $750,000 (the “high”).  The arbitrator arbitrated the case over two days and found no cause of action against Dr. Clifford Schob and dismissed the law suit.  However, based on the high/low agreement, plaintiff was paid $250,000 even though Dr. Schob was found not to be at fault.

The issue in this published decision arose because plaintiff refused to reimburse PMA Insurance Company and the Garden State Municipal Joint Insurance Fund its statutory two thirds of the $51,779.81 paid to Marano.  The GSMJIF refused to compromise the lien, so plaintiff filed an order to show cause and a verified complaint in the Law Division seeking a declaration that the payment in the high/low agreement was not subject to any workers’ compensation lien.

The thrust of the argument made by plaintiff was that this issue was not the same as one previously decided in Pool above.  Plaintiff argued that N.J.A.C. 11:1-7.3(a) was passed after Pool was decided. That regulation provides that a medical malpractice insurer must notify the Medical Practitioner Review Panel of any medical malpractice settlement, but not in a high/low agreement where the arbitrator found no liability on the part of the medical practitioner. That language excluding the notification provision for no cause decisions in high/low agreements was added in 2009 after Pool.  Plaintiff argued that fewer high/low agreements will be negotiated if Marano is ordered to reimburse the GSMJIF.  He said that future plaintiffs will have to demand higher “low” figures to take into account lien obligations.

The Appellate Division affirmed the trial judge stating:  “That concern has no relationship to a compensation carrier’s rights under Section 40 to impose a lien on the recovery.” The Court noted that there is a strong public policy in New Jersey preventing double recovery.  It said that “whether an alleged tortfeasor is ultimately held to be liable does not affect the enforceability of a lien.”

As to the nurse case manager fees, the court remanded to the Law Division to decide whether those charges should be considered medical expenses under the New Jersey Workers’ Compensation Act.

This case was an important win for employers, and it was handled successfully by Christopher Carlson, Esq. of Capehart Scatchard on behalf of PMA and the Garden State Municipal Joint Insurance Fund.  The case shows that employers need to be prepared to sue to enforce their lien rights when plaintiff’s counsel refuses to reimburse the employer/carrier for their statutory lien.  The JIF wisely refused to compromise its lien in this case and in the end prevailed at trial and on appeal.

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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.