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Petitioner Joan Haggerty worked for Cape May Regional Medical Center (Crothall Service Group). She tore her left rotator cuff and bicep tendon while working as a housekeeper. Months later she injured her neck and left shoulder making a bed and stretching sheets. She filed a workers’ compensation claim for each injury and later amended the left shoulder claim to include an overuse claim of the right shoulder. She had two surgeries on the left shoulder and one surgery on the right shoulder.
Petitioner obtained an order for medical and temporary disability benefits in 2015 approving treatment with Dr. Matthew Pepe. He referred petitioner to Dr. Peter Corda for pain management, who in turn referred petitioner to Dr. Charles Krome. Four platelet rich plasma injections were recommended by Dr. Krome.
The issue in the case arose when it became clear that the platelet rich injections did not help petitioner. Dr. Krome then recommended stem cell treatment for the right shoulder. He felt that this would be a conservative measure but petitioner would still likely require total shoulder replacement surgery in a few years. Petitioner then filed an amended motion to compel respondent to pay for the stem cell therapy. Respondent opposed the motion by noting that the stem cell treatment was not approved by the U.S. Food and Drug Administration (FDA).
Because the judge had questions for Dr. Krome, the judge called the doctor from his chambers on May 4, 2018 in the presence of both counsel. The judge asked several questions, but neither counsel asked any. At the next listing of the case on May 25, 2018, petitioner testified that she did not want another shoulder surgery. She needed to work in order to care for her terminally ill husband. She said she knew that the stem cell therapy was not FDA approved but she wanted to undergo it. She said she was also aware that it might only provide temporary relief.
Following petitioner’s testimony, the Judge of Compensation issued an order requiring respondent to provide the stem cell treatment. The judge commented that Dr. Corda wrote a letter stating that this treatment was widely used in professional sports. The judge also observed that respondent did not provide any expert report addressing this issue. Finally, the judge found Dr. Krome to be credible.
On appeal Crothall argued that it was error to determine credibility of a physician based on an unrecorded phone call without formal testimony. Crothall also argued that the treatment was not sufficiently accepted in the scientific community.
The Appellate Division observed the rules on motions for medical and temporary disability benefits, noting that respondent’s counsel had raised a defense that the treatment was not FDA approved. “Under the regulations, the judge was required to hold a hearing where Crothall could cross-examine witnesses.”
The Court also questioned the validity of using a phone call to a physician as a basis to determine credibility. “Even if credibility could be determined in that manner, without a record there is no ability to review what was said.” The Court said that when an important issue is discussed in chambers, “a record must be made or a summary placed on the record of what transpired in chambers.”
The Appellate Division held that the procedures in chambers “lacked fundamental due process.” The Court was critical of the failure to record the testimony of Dr. Krome and the failure to allow respondent’s counsel to cross examine the doctor. For these reasons the order was reversed, and the matter was remanded.
The case can be found at Haggerty v. Crothall Service Group, A-4478-17T4 (App. Div. May 3, 2019). This case reminds us that due process applies to proceedings in workers’ compensation court and that fundamental fairness to both parties is the lodestar of court proceedings. The Appellate Division never ruled on whether stem cell treatment can be ordered but rather focused solely on the fairness of the process in the Division proceedings.
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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.
Ask any practitioner about the nature of Medicare and his or her response will usually be that it is a source of medical coverage for the very poor, such as those receiving SSI (Supplemental Security Income.) Alas, such an answer is no longer correct, nor is it safe. Why? Well, as in the case of ERISA liens, (Ah ha! Now you know where you’ve seen my name before!) we are again dealing with the dreaded “F” word. No, not that “F” word, the one which resulted in Ralphie enjoying the subtle flavor of Lifebuoy (remember, “A Christmas Story?”). No, once again we have a federal Act, establishing both the benefit and the requirement of recovery of any claims paid for which a third-party source is legally liable. The (somewhat) good news is, however, that the recovery mechanisms (liens) are administered by the states. More on this later.
Medicaid was established by federal law, 42 U.S.C 1396 et. seq. (the Act.) The intent of this Act was to provide medical coverage for people unable to afford their own coverage. Like other federally-established health coverage such as Medicare and Veterans Administration benefits, Medicaid (and as the title indicates, NJ Family Care – hereinafter NJFC) is intended to pay health care costs for illnesses, injuries, etc., where no other coverage is legally obligated to pay. In other words, they are “payors of last resort.” This is seen in N.J.A.C. 10:49-7.3(1)(b), “Medicaid and NJFC program benefits are last-payment benefits. All [third party liability medical benefits]…shall, if available, be used first and to the fullest extent in meeting the cost of the medical needs of the Medicaid or NJ Family Care beneficiary…”
While established by federal law, Medicaid & NJFC are state-funded and administered. Additionally, and most important to the purpose of this article, the Act contains a requirement that the states establish a mechanism to pursue the recovery of any payments made by Medicaid/NJFC for which a third-party source should be legally liable. These sources include, but are not limited to, workers’ compensation coverage and casualty insurance in tort recoveries. In New Jersey, recovery of improper payments is contracted to HMS.
In addition to recovery efforts by HMS, a provision in N.J.S.A. 30:4D-7.1(b) states “…every recipient or his legal representative shall promptly notify the division (Division of Medical Assistance and Health Services) of any recovery from a third party and shall immediately reimburse the division in full from the proceeds of any settlement, judgement, or other recovery in any action or claim initiated against any such third party…” Clearly, this places a duty to report such recoveries on the injured party’s attorney. However, respondents take note. The Statute on the Code speak of recovery from a third party. And, in Hedgebeth v. Medford, 74 N.J. 360, (1977) our State Supreme Court stated that New Jersey’s Medicaid law evidences an “…unmistakable intent to afford the State every opportunity to recoup its payments from third parties.” Thus, both petitioners and respondents have an interest in the outcome of petitions involving such liens. In the event that a petitioner fails to give notice where Medicaid/Family Care clearly provided treatment, a respondent could likely give notice or file a motion to compel petitioner to give notice.
OK, so with the legal background established, what should a claimant’s attorney do to protect his/her client, him/herself, and honor the law? Well, this process begins with the initial interview with a new client. No attorney should assume that a client has medical coverage through an employer; Medicaid is increasingly the coverage for many people, even those who work for employers which provide excellent coverage. Traditionally, Medicaid/NJFC covered people who were very poor, disabled or both. Now, however, more and more people are covered by Medicaid and NJFC. As a practitioner I have personally observed that more and more people no longer have coverage offered by their employers; in many such situations they can no longer afford the employee’s portion of the premium. And so, they are now covered by N.J. Family Care, a “payor of last resort.”
Accordingly, at this first meeting with a new client the workers’ compensation attorney must ask whether the client is covered by Medicaid/NJFC. If so, notice must be immediately given to HMS of the claim in question. This has always been done by mail; however, HMS now has a Web-Portal for submission of the necessary documents. The mailing address/portal information can be obtained on the HMS website for New Jersey Medicaid. (Sorry, this article is to raise awareness of these issues; I won’t do your work for you!) Once that is done, HMS will send the attorney a set of questions to be answered concerning the happening of the accident, is it workers’ compensation or tort, what body parts were involved, etc. These questions are designed to allow HMS to determine what payments, if any, have been made for which a third party is legally liable. HMS will then send the attorney an initial Statement of Aid Paid, if in fact payments were made. Later, after a settlement has been agreed to but PRIOR to seeking approval of the settlement by a Judge of Workers’ Compensation, the petitioner’s attorney MUST provide HMS a copy of the proposed Order Approving Settlement or Section 20 Order, inclusive of fees and costs. Thereafter, HMS will issue a Final Statement of Aid Paid. In my experience, (fortunately, to date observing others,) delayed responses from HMS are frequently caused by incomplete/incorrect submission of documents.
OK, so now I’ve discussed the origin of these state-funded plans; what they pay for and, most importantly, what they DON’T pay for; law and mechanisms for recovering payments; and, how to provide proper documentation to HMS. Now, all of you are thinking, I will tell you what guidelines exist for negotiating these liens, the power of workers’ compensation judges to deal with them, etc., etc., all the things to make your lives easier, right? Well, time to cue the occasional chirping of crickets; no other sound to break the silence. Right, you guessed it, I’ve been unable to find any guidelines, code provisions, case law, etc. to smooth the process of closing workers’ compensation cases with HMS liens. Nothing. Nor have I spoken to anyone who has found such guidance. Of course, if the liens contain payments for treatment clearly unrelated to the work-related injury, write to HMS and ask them to please remove them. Still, I and many others believe there should be some guidance in this area.
So, what is the answer? Well, I have a definite idea as to what should be done. I may be told it’s unrealistic, that it is an area in which I have no business treading, I may even upset some people. But, as that increasingly popular little creature says, “Honey Badger don’t care.” (No, don’t ask. I won’t tell!)
Several years ago there were questions as to the proper method to close a workers’ compensation case where the Petitioner was in receipt of an Accidental Disability Pension. High ranking representatives of the Division of Workers’ Compensation met with similar representatives from the Division of Pensions to work out the issues, resulting in a Memo from former Director/Chief Judge Calderone outlining the accepted methods of closing such claims.
I believe similar actions need to be taken here. However, considering the fact we are dealing with benefits created under federal law, and considering the large sums of money which are the subject of HMS liens, I suggest that the Department of Labor and HMS should attempt to work this out. Obviously, the Division of Workers’ Compensation will provide more than significant input. May I also suggest (ok Al, now you are really going out on a limb) that the Commissioner’s Advisory Committee on Workers’ Compensation be reconstituted to provide valuable input here, and in other issues affecting the practice of Workers’ Compensation. Just a thought.
(Editor’s Note: Many thanks for Attorney Al Vitarelli for educating us all on Medicaid liens. This is an increasingly important part of the NJ workers’ comp practice.)
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Editor: 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.
Vinno Verasawmi was the sole proprietor of VKR, which manufactured custom kitchen cabinets for residential and commercial customers. The company had two other employees. Verasawmi would visit construction sites and meet customers in the ordinary course of business. He drove a Porsche Cayenne, registered in his own name, both for personal and business use. He testified that he bought the Porsche to impress potential customers.
On April 24, 2012, Verasawmi left his house at 6:45 a.m. to go to his shop in Middlesex, N.J. Then he proceeded to a construction site in Peapack, N.J. where he installed kitchen cabinets. He also picked up architectural drawings and started driving back to the shop. It was then that he noticed a red warning light on the dashboard of his car, indicating a need for service.
Verasawmi drove to the shop, dropped off the drawings, and then proceeded to drive to an auto dealership in Edison, N.J. arriving at 10:00 a.m. He left the vehicle at the dealership and rented a replacement vehicle. Subsequently he drove from the dealership in the replacement vehicle back to his shop in Middlesex. On the way to the shop he was involved in an accident with a tractor-trailer. He filed a claim petition alleging serious injuries that prevented him from operating his business. He also filed a third party suit.
Verasawmi argued that as the employer, he directed himself to take the Porsche to the dealership for servicing. He contended that this trip and the return trip to the office were compensable because his employer directed him to make the trips.
The Judge of Compensation ruled that petitioner was not in the course of his employment at the time of his accident. The Judge held that the maintenance on his vehicle did not constitute a benefit to his employer. The Judge also commented that Verasawmi initially claimed he was on the way to a job site when the accident occurred, but in the law suit against the operator of the tractor-trailer he conceded he had been returning to his shop when the accident transpired. In the end, the Judge of Compensation found that petitioner’s actions were entirely personal in nature, and he would have had to get the vehicle repaired regardless of whether he was working for VKR or not.
On appeal Verasawmi argued that the use of the vehicle redounded to his employer’s benefit. He maintained that since he owned VKR, and since he was an employee of the company, he had the sole discretion to decide whether he was engaged in his job duties at the time of the accident.
The Appellate Division affirmed the dismissal of Verasawmi’s claim. It noted that the car was registered in Verasawmi’s own name, and he used it for both personal and business reasons. Further, he was returning to his shop, not to a construction site. The Court said, “… Verasawmi was on a personal errand that he would have had to undertake regardless of whether he was working for VKR. His action, which involved traveling from Middlesex to Edison and back, was not a minor deviation from any prescribed work duties.” This case is instructive because there are not many New Jersey cases involving the often heard contention that a sole proprietor has complete discretion in determining what is and what is not work related. Clearly, if one’s boss requires an employee to perform a certain activity, like dropping off a car for repairs, that drive would be work related. In this ruling the Court rejected the argument of the sole proprietor that he directed himself to perform what he contended later was a work mission. The Court did not reject the concept of dual capacity, namely that the sole proprietor is both employer and employee, but it rejected the claim because the facts suggested that the vehicle was used for personal reasons and the work being done on the vehicle was fairly routine maintenance. The outcome might have been different if the petitioner had been driving to a construction site instead of returning to his office. The case can be found at Verasawmi v. Vino’s Kitchen Renovations, LLC, A-2273-17T3 (App. Div. April 23, 2019).
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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.
Readers of this blog know that it is extremely difficult for an employee to sue his or her employer or co-employee in civil court. That was proven again in Johns v. Wengerter, A-2053-17T1 (App. Div. April 1, 2019).
Johns, a City of Linden firefighter, was on duty at the firehouse on November 27, 2015. He went to use the toilet but when he sat down, he heard and felt an explosion beneath him. The explosion was caused by a bang snap, which is a small firework that detonates when compressed. Johns suffered second degree scrotal burns as well as a contusion and a blood blister.
A co-employee, Wengerter, admitted to Johns that he placed bang snaps in various places in the firehouse as a prank. He also apologized to Johns after the incident. Later on he denied having done this. Johns never filed a workers’ compensation claim. Instead, he sued Wengerter in civil court. Wengerter defended the suit by raising the exclusive remedy provision of the New Jersey Workers’ Compensation Act. That provision in N.J.S.A. 34:15-8 renders workers’ compensation the only remedy for injuries to workers arising from their employment, except for rare circumstances. Johns argued that the claims were not barred because Wengerter was acting outside the scope of his employment. He also asserted that Wengerter’s actions were intentional.
The trial court dismissed the suit, and Johns appealed. The Appellate Division reviewed the record and concluded that the trial court’s dismissal of the case had adequate support. It said, “Johns produced no evidence that Wengerter’s placement of the bang snap on the toilet was anything other than an ill-conceived prank or ‘so far a deviation’ from work-related activity ‘as to constitute an abandonment of his employment.’ “
The Court also added that this injury to Johns would be covered under the New Jersey Workers’ Compensation Act as Johns was the victim of horseplay. “The placement of a bang snap on a men’s room toilet falls within the realm of coworker horseplay intended to startle, but not injure, a coworker despite the unfortunate and unintended result in this instance.” In evaluating whether this was co-worker horseplay, the Court noted: 1) the actions took place in the workplace; 2) Johns and Wengerter were on duty, and 3) the fixture involved, namely the toilet, was part of the employer’s workplace.
In regard to the argument that Wengerter intended to harm Johns, the Court said that there was simply no evidence in the record to support this assertion. “There is no suggestion in the record that Wengerter was aware that the particular circumstances of the prank that injured Johns was substantially certain to result in a physical injury.” This case is a useful one for distinguishing horseplay (which is always compensable for the victim) from acts of intentional harm (for which an employee can bring a civil suit). Proving intentional harm remains extremely rare and difficult in New Jersey, and the plaintiff in this case did not come close.
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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.
After at least four decades of disagreement on lien reimbursement calculations in high third party settlements, the Appellate Division this week handed down a reporteddecision in Liberty Mutual Insurance o/b/o Sabert Corporation v. Jose R. Rodriguez, A-0112-17T4 (App. Div. April 2, 2019). Betsy Ramos, Esq., co-chair of Capehart’s litigation department, successfully argued the cause for the workers’compensation carrier.
The facts of the case are simple. Mr. Rodriguez was injured in 2012 arising out of his employment with Sabert Corporation. Liberty Mutual, the workers’ compensation carrier for Sabert, paid $148,590.40 in workers’ compensation benefits including medical and temporary disability benefits. Mr. Rodriguez sued the tortfeasor and settled his third party suit for $1,200,000. The question was how to calculate Liberty Mutual’s lien: was it two thirds or higher than that percentage? The law firm for Rodriguez sent a check for two thirds minus $750 for costs. Liberty Mutual rejected the offer and filed an order to show cause and verified complaint claiming that the percentage should be calculated based on the actual fee paid by the injured worker to his lawyer as a percentage of the overall settlement.
There is a standard court rule for legal fees in large civil settlements. Rodriguez paid his third party lawyer based on the court rule at that time: one third of the first $500,000; 30% of the next $500,000 and 25% of the next $500,000 for a grand total of $366,666. The current court rule applies to stages of $750,000 today. Rodriguez actually paid 30.56% of the total settlement of $1,200,000 in counsel fees. Liberty Mutual therefore argued that its lien should not be 66.67% but rather 69.44% (100 minus 30.56 = 69.44). The trial court agreed with Liberty Mutual, and Rodriguez appealed to the Appellate Division, which affirmed the trial court.
Rodriguez argued that Liberty Mutual should be limited to two thirds because he paid only one third of the first $500,000 to his lawyer, and Liberty’s lien did not exceed $500,000. It totaled $148,590.40. The Appellate Division reviewed conflicting decisions on this issue, one Supreme Court case going back to 1955 (favoring Liberty’s position) and one reported Appellate Division decision from 1974 (favoring Rodriguez’s position).
In the end, the Court ruled that the 1955 Supreme Court decision in Caputo v. Best Foods, Inc., 17 N.J. 259 (1955) was binding on the Court in spite of subsequent Appellate Division decisions that took issue with Caputo. The Court ruled in favor of an approach which focuses on how much the injured worker paid his or her lawyer. One takes that figure as a percentage of the total settlement. So Liberty Mutual’s lien was in fact 69.44% of the $148,590.44 or $103,181.20 because that is the composite percentage of how much Rodriguez paid his lawyer. It did not matter that Rodriguez paid one third of the first $500,000. You need to work through all the staged payments that Rodriguez paid, the first at one third, the second at 30% and the third at 25%. This is a significant victory for employers, third party administrators, and carriers. There are many million dollar settlements in third party cases stemming from workers’ compensation injuries. We now know how to calculate the lien. The confusion between competing published cases has been resolved. The ruling means that respondents will recover greater than two thirds when the third party settlements are significant such as those in the seven figure range. As practitioners know, it is not always accurate to say that respondent’s lien is two thirds. It is never less than two thirds, but it can be more than two thirds, as this case illustrates.
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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.
As practitioners well know, many ADA law suits begin with a workers’ compensation injury. But where is the line between an issue that must be handled in workers’ compensation and one that can be brought in civil court? That was the issue that the New Jersey Supreme Court decided on March 25, 2019 in Caraballo v. City of Jersey City Police Department (A-71-17) (080467).
Caraballo joined the Jersey City Police Department (hereinafter JCPD) as a police officer in February 1973. He injured his hands, back, and legs in August 1999 during a motor vehicle accident and filed a workers’ compensation claim. He underwent anterior cruciate ligament reconstruction surgery on his left knee.
Two city-appointed physicians gave opinions that Caraballo would eventually need bilateral knee replacement surgery. Caraballo’s workers’ compensation attorney contacted defense counsel for JCPD in 2008 and requested approval for the knee replacement surgery. Caraballo’s attorney also requested a specific physician to perform the surgery, noting that Risk Management had approved that physician.
Surgery did not take place for reasons that are not clear in the opinion. In August 2010, Caraballo put in his retirement papers with the New Jersey Division of Pensions and Benefits effective March 1, 2011. Lieutenant John McLellan of the JCPD Medical Bureau was of the impression that Caraballo did not intend to pursue the surgery. McLellan also noted that Caraballo refused to see a certain doctor “who would be able to determine unequivocally whether or not he should have the surgery.”
Caraballo retired on March 1, 2011. Thereafter Risk Management authorized an orthopedic surgeon to evaluate Caraballo for bilateral knee replacement surgery. The doctor told Caraballo to contact the office to pick a date for surgery pending medical and cardiac clearance. However, Caraballo never called the doctor’s office to schedule a date for surgery.
On March 4, 2013, Caraballo finally settled his workers’ compensation claim. A short time later, he brought a civil suit alleging that the City violated his rights under the New Jersey Law Against Discrimination for failing to authorized the knee replacement surgery and failing to make reasonable accommodations to his disability.
The trial court ruled against Caraballo because he failed to enforce his rights to have knee surgery in workers’ compensation court. Apparently, he never filed a motion for medical and temporary disability benefits. The Appellate Division reversed in favor of Caraballo. The Appellate Division observed that Caraballo may have been able to perform the essential functions of his job had he obtained a reasonable accommodation of knee surgery.
The New Jersey Supreme Court accepted certification and reversed the Appellate Division. The Court relied on prior case law to the effect that an employee must first exhaust all administrative remedies under workers’ compensation before seeking enforcement in the Law Division. The Court said:
Here, Caraballo filed his workers’ compensation claim in 2001, retired in 2011, and settled his claim with the JCPD in 2013. In the interim, Caraballo contacted Risk Management several times to obtain authorization for double knee replacement surgery but never sought to enforce his right to the surgery in the workers’ compensation court. Caraballo’s failure to utilize the Act’s administrative remedies to obtain knee replacement surgery precludes his failure-to-accommodate claim under the LAD.
The court next went on to consider whether surgery can be considered a reasonable accommodation in New Jersey. The court first cited to the language in the LAD and ADA for specific examples of reasonable accommodation: (i) making facilities used by employees readily accessible and usable by people with disabilities; (ii) job restructuring, part-time or modified work schedules or leaves of absence; (iii) acquisition or modification of equipment or devices; and (iv) job reassignment and other similar actions.
The Court observed that no New Jersey case prior to Caraballo had ever addressed the question of whether medical treatment qualifies as a reasonable accommodation under the LAD. A case in Connecticut was instructive to the Court, Desmond v. Yale-New Haven Hosp., Inc., 738 F. Supp. 2d 331, 350 (D. Conn. 2010). In that case the Connecticut District Court ruled against a workers’ compensation plaintiff who argued that in order to continue working she would need medical treatment, including pain management and physical therapy. The Connecticut Court held that a reasonable accommodation must relate to workplace barriers. There was no responsibility under the ADA or state civil rights law to make sure an injured employee is receiving appropriate medical treatment.
The New Jersey Supreme Court agreed with the ruling in Desmond:
The medical procedure sought by Caraballo – his double knee replacement surgery – is neither a modification to the work environment nor a removal of workplace barriers. Rather, it is a means to treat or mitigate the effects of his injuries, like the treatments at issue in Desmond. We therefore find it consistent with the LAD, the ADA, and their regulations that Caraballo’s total knee replacement surgery cannot qualify as a reasonable accommodation under the LAD.
This case is truly significant for practitioners, carriers, third party administrators and workers’ compensation professionals. Had the ruling gone the other way, employees would have been able to pursue civil action against employers for potential denial of benefits in workers’ compensation. The Court is undoubtedly correct that this would violate the basic rule that workers’ compensation is the exclusive remedy for injured workers regarding medical benefits.
Thanks to Rick Rubenstein, Esq. for bringing this case to our attention.
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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.
The ERISA Lien – – A Federal “Partner” In State Workers’ Compensation Litigation
By: Alfred Vitarelli, Esq., Shareholder, Stark & Stark
If the workers’ compensation practitioner reading this otherwise dry blog finds his/her mind wandering to more exciting topics, let your mind focus on that ominous line from the 1987 classic “Fatal Attraction:” I will NOT be IGNORED!”
No, I am not comparing the great acting of Glenn Close to ERISA. I am, however, making the important point that like Close’s character, ERISA must never be ignored.
I’ll begin discussing ERISA liens by presenting a scenario played out with distressing frequency in New Jersey workers’ compensation courts. Petitioner’s attorney informs the Judge that a private disability plan (the plan) has provided treatment in the denied claim presently before the Court. An agreement has been reached with Respondent to settle the claim on a Section 20 dismissal. However, the plan has asserted a substantial lien for payments made on behalf of the petitioner. To make matters worse, the plan has not to date provided detailed billing records, medical documentation, etc., which the parties hope will allow the reduction of the amount of the lien, and this is delaying the settlement. Accordingly, petitioner’s attorney will be filing a motion requesting the court to rule out the lien if the plan does not appear on the return date of the motion.
See any problems with the above scenario? Well, yes. And yes.
First yes: based on the facts given above there has been no consideration as to the status of the plan lien; since this is a discussion of ERISA, the parties are unaware if the plan is covered by ERISA. And why is this important? Because ERISA plans are created by federal law, and thus are subject only to federal jurisdiction. That’s why.
Second yes: because any order entered against an ERISA plan by a state court judge is ultra vires (meaning, acting beyond one’s legal power). Since ERISA plans are only subject to federal jurisdiction, they can ignore any such order as discussed above and sue in federal court to recover the amount of its lien. That’s why #2.
Ok, let’s get down to a serious discussion of ERISA. (Actually, I think this has been serious all along, but I’m sure there are those who will disagree).
Exactly what is ERISA? The Employment Retirement Income Security Act of 1974, ERISA, is a federal law which sets minimum standards for most voluntarily established pension, health and disability plans in private industry. ERISA allows an employer to establish self-funded plans. These plans are employee benefits which pay claims through either the assets of the employer or through a trust which is funded by contributions from the employer and employees. An ERISA health plan differs from a traditional health insurance policy which is purchased through premiums to provide coverage. ERISA expressly pre-empts “any and all state laws insofar as they may now or hereafter relate to any employee benefit plan.”
So, having said that, who or what entities are covered by ERISA? ERISA applies to private industry. In general, ERISA does not cover group health plans established or maintained by government entities, churches for their employees, or plans which are maintained solely to comply with workers’ compensation, unemployment or disability laws. A prime example of what plans are covered by ERISA are those provided to employees pursuant to a collective bargaining agreement between a labor union and an employer. These plans are funded either entirely by the employer or by contributions from the employees as called for by the employer/union agreement.
Ok, now we know what an ERISA plan is, and (hopefully) understand the necessity of directly addressing liens asserted by these plans. So how can an attorney faced with a private plan lien determine if the plan is covered by ERISA? This can’t be determined by just looking at the client’s benefit card; they don’t say “This plan is covered by ERISA.” When the status of a lien is in doubt the best way is to request from the Plan Administrator the Summary Plan Description, IRS Form 5500. The Administrator is required to furnish a copy of the latest updated plan documents, including the Master Plan Document. These should be reviewed carefully, since an ERISA plan must clearly state the existence of a right to recovery. NOTE: Never assume that because the lien is asserted by a “traditional” insurance carrier such as Aetna, Cigna, BlueCross/Blue Shield, etc., that the plan is paid by premiums and is therefore not a private benefit plan covered by ERISA. Such insurance carriers do act as TPAs for ERISA plans. When in doubt ask for the IRS form 5500. Another method to obtain the form 5500 is to register online at www.freeerisa.com. I have not used this yet, but some attorneys find this a very convenient method to obtain this information.
Federal Jurisdiction – what are the implications if a lien is not honored?
Earlier in this blog it was noted that ERISA plans are only subject to federal jurisdiction; the doctrine of federal preemption applies as well. If an ERISA lien is not honored when asserted in a workers’ compensation case the plan provider may file an action in federal court to enforce its right of subrogation as contained in the plan. This is authorized by Section 502(a)(3) creating an equitable form of relief in the recovery of payments. This equitable right of recovery was most famously recognized by the U.S. Supreme Court case of US Airways Inc. v. McCutchen, 133 S. Ct.1537 (2013). Here, the Court held that an equitable lien is created by the language of an ERISA Plan, and the language of the Plan controls absolutely, even to the exclusion of common-law principles of unjust enrichment, the make-whole doctrine and the common-fund rule.
Please note carefully, however, that McCutchen holds the language of the Plan controls. While most practitioners will be aware of the McCutchen decision, fewer know the ultimate outcome of the litigation. After the Supreme Court rendered its decision, it remanded the case to the lower court to review the language of the Plan documents. Surprise, surprise! It turns out that the attorneys in the case did not review the Plan documents before the Supreme Court remand. The lower court found that while the Summary Plan Description supported the recovery of the full lien, the Master Plan Document did not. As a result, US Airways was only entitled to a recovery on a small portion of the overall settlement below. ALWAYS READ THE DOCUMENTS!
The above points should make it clear that in ANY situation where a petitioner received unauthorized treatment through a private benefit plan his/her attorney must be aware as early as possible in the litigation whether the plan is covered by ERISA. There are too many pitfalls which may be encountered by ignoring the status of these Plans (including recovery of the lien by attaching attorney fees.) Of course, non-ERISA plan liens must also be addressed, but they at least may be covered by state laws on subrogation, something outside the topic of this blog.
Before ending, I feel it necessary to discuss the potential role of the respondent attorney in these situations. I can hear most of you already: ”what role? there is none…petitioner’s problem….not my fees that can be attached…that lien is just a darn nuisance, my role is to make it go away so I can close the file.” OK, so maybe that last comment was a stretch, but the others are heard…and wrong. Remember the definition of an ERISA plan? How it is funded? Entirely by employer or by employer and employees? Right, now you get it. Employer = Respondent (in many if not most cases.)
So, having also been a respondent attorney for many years, I feel that the employer should always be consulted in ERISA lien situations before settlement discussions begin considering the financial implications of the Plan paying for possibly work-related treatment. I have definite ideas about what approaches to take, but I’ll leave it to others to fill in the blanks.
Please keep in mind that both this blog and the study of ERISA liens generally are works in progress. This blog is intended to raise the awareness of the workers’ compensation bar of the necessity of seriously addressing ERISA liens, not to serve as a how-to guide in every case. Each case will have its own unique issues, so always keep this in mind, and whenever in doubt, request the documents, don’t ignore!!
(Editor’s Note: Many thanks to Attorney Al Vitarelli for sharing this highly entertaining and educational blog on a topic most practitioners knew very little about but one that we all need to pay close attention to).
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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.
It is a remarkable coincidence that the three cases that best explain entitlement to permanent partial disability benefits in New Jersey all involve claimants with the last name of Perez. The most important of the three Perez cases is Perez v. Pantasote, 95 N.J. 105 (1984). This case addressed the key statutory definition in N.J.S.A. 34:15-36, which provides:
‘Disability permanent in quality and partial in character’ means a permanent impairment caused by a compensable accident or compensable occupational disease, based upon demonstrable objective medical evidence, which restricts the function of the body or of its members or organs;
This case stands for the proposition that subjective complaints alone are not sufficient to meet the standard for an award of partial permanent disability. Hence the emphasis on objective tests such as MRIs, x-rays, EMGs, CT scans, pulmonary function testing and other similar studies. The Perez principle was next applied to psychiatric disability claims in Saunderlin v. E. I. DuPont Co., 102 N.J. 402 (1986). Even in psychiatric claims, the emphasis is on more than just recapitulating the complaints and statements made by the injured worker. The Supreme Court said that psychiatric experts should include observations of physical manifestations of the symptoms related by the injured worker.
The next two Perez cases dealt with the remaining aspects of the test outlined in N.J.S.A. 34:15-36. The first was Perez v. Monmouth Cable Vision, 278 N.J. Super. 275 (App. Div. 1994), certif. denied, 140 N.J. 277 (1995). This case focused on the following language in the statute:
Included in the criteria which shall be considered shall be whether there has been a lessening to a material degree of an employee’s working ability.
The Court rejected an interpretation of the above language which would require an injured worker to prove in every case a lessening to a material degree of working ability. The Court said that the claimant can obtain an award of permanent partial disability by proving either a substantial impairment of non-work activities or a lessening to a material degree of working ability. It is an either/or test. In this case the employee complained of loss of grip strength, pain in the wrist while playing with his children, diminished ability to play volleyball and not being able to do as much weightlifting as in the past. The Court held that these complaints were sufficient to meet the test of having an impairment of the ordinary pursuits of life. Petitioner did not need to prove work impairment to get his award.
Perez v. Monmouth Cable Vision is very important for two reasons: one, it shows that an employee with objective evidence of permanent partial disability who gets back to work doing the same job can still receive an award of permanency if he or she can prove a substantial impairment of the ordinary pursuits in life. Two, it shows that the threshold required by the employee for testimony about impairment of the ordinary pursuits of life is not particularly high.
The third case is Perez v. Capitol Ornamental, 288 N.J. Super. 359 (App. Div. 1996). The petitioner in this case suffered a herniated disc. He worked as a farm laborer in Puerto Rico before doing landscaping and construction in the U.S. After he had his laminectomy surgery, he continued to have back problems and applied to the Division of Vocational Rehabilitation for job training. He was out of work for years and could not find work. Respondent’s evaluating physician estimated 12.5% permanent partial disability but stated at trial that he did not consider petitioner’s employment problems when he provided his estimate.
The Judge of Compensation awarded 32% permanent partial disability, which was much less than what the petitioner thought he was entitled to. The Judge wrote, “ . . . the award which I presented in my opinion was determined on a basis and with the purpose of being consistent with similar injuries previously presented to me for disability determination.” The Appellate Division took this comment to mean that the Judge of Compensation had not really considered the difference between a person with a spine surgery who gets back to work and a person with spine surgery who cannot return to work. It reversed the decision because the percentage of the award to Mr. Perez should have taken into account the severe impact on petitioner’s working ability.
Perez v. Capitol Ornamental makes an important contribution to the workers’ compensation formula for permanent partial disability by establishing a principle that cases should be valued higher where the injury causes a career change or career loss as compared to cases where no such career loss occurs.
Together the three Perez cases delineate the basic requirements for an award of permanent partial disability: 1) objective medical evidence of restriction of function; plus either 2) a substantial impairment of non-work activities or 3) a lessening to a material degree of working ability.
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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.
On February 25, 2019, the New Jersey Legislature voted to send to the Governor’s desk Senate Bill No. 1967. The Senate passed the bill on October 29, 2018 and the General Assembly passed it on February 25, 2019. The Governor is expected to sign the bill shortly.
The original bill was intended to provide a cost of living (COLA) for all workers rendered totally and permanently disabled, or to the dependents of workers, who died as a result of a workplace injury after December 31, 1979. The stated purpose of the legislation was to mirror the Special Adjustment created in the 1979 amendments for that same class of workers injured or killed before December 31, 1979, (RS. 34:15-95.4). The bill was amended to limit the payment to Public Safety Workers or their dependents in the case of work-related death from workplace injury.
The legislation defines Public Safety Workers in paragraph 4(e): “For the purpose of this section, ‘Public Safety Worker’ means a member, employee, or officer of a paid, partially-paid or volunteer fire or police department, force, company or district, including the State Police or a first aid or rescue squad.” Note that this definition does not include hospital EMTs or private fire departments at large plants operated by the private sector.
Funding for the special adjustment comes from an increase in the assessment for the Second Injury Fund which is levied on insurance premiums payable by private employers for their workers’ compensation policies. A like assessment is made on self-insured companies. These assessments affect only private sector employers. The State of New Jersey and its subdivisions are not liable for the Second Injury Fund assessment. Therefore, the funding is collected from the private sector for which the benefits do not apply. This results in the bill having no fiscal impact on the state or local budgets, but it will have a fiscal impact on private employers.
Those covered by this bill will be eligible for the special adjustment as of July 1, 2019 but not retroactive to the date of the award of Total Permanent Disability or death of the “Public Safety Worker.” Going forward, the public employer shall identify those eligible and report them to the Office of Special Compensation. The public employer will continue to pay at the rate set at the time of the award of permanent disability. The Second Injury Fund, Office of Special Compensation will pay the amount sufficient to bring the total award to the same percentage to maximum rate for the current year.
Example: Police officer is injured and deemed totally and permanently disabled as of July 1, 2002. The officer is earning wages of $900 per week and the maximum rate for permanent total disability is $629 per week in 2002. The officer receives an award payable at $629 per week for 450 weeks and continuing so long as the officer is permanently disabled under the terms of N.J.S.A. 34:15-12b. (Officer’s salary is sufficient for the maximum rate in 2002). Effective July 1, 2019, the officer will be paid $629 per week by the employer and will receive $292 per week from the Second Injury Fund by way of the Special Adjustment bringing the officer to the maximum rate for 2019. Because the officer qualified for the maximum rate at the time of the award, the officer is eligible for the maximum rate in the year of the special adjustment.
The COLA will be reduced for beneficiaries to the extent necessary to ensure that inflation adjusted benefits do not cause a reduction of Federal Social Security disability benefits. COLA benefits are also to be reduced by the original amount of any Social Security benefits (but not the amount of any Social Security disability benefits and any subsequent cost-of-living increase in Social Security benefits), Black Lung benefits, or the employer’s share of disability pension payments received from or on account of an employer.
The COLA will be denied to an otherwise eligible Public Safety Worker who is also eligible for SSD but will not apply. In virtually all cases, the Public Safety Worker will be eligible for an Accidental Disability Pension, and the Division of Pensions and Benefits will take the offset.
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Prior to joining Capehart Scatchard as Of Counsel, Judge Hickey III (Ret.) served as the Compensation Administrative Supervisory Judge for the State of New Jersey from 1991 to 2009. Previous to his judgeship, he served as a Prosecutor in Gloucester County, New Jersey from 1986 to 1991.
Jennifer Kocanowski, a member of the Finderne Fire Department in the Township of Bridgewater, was injured in March 2015 while carrying equipment in response to a multi-alarm fire. She fractured her fibula, tore ligaments in her ankle, and injured her back.
Prior to the injury, Kocanowski had not worked for over a year. She had previously worked in 2013 as a nanny and a home health aide but took a six month leave from volunteering to care for her ill mother after her father’s death. She returned to volunteer firefighting in July 2014. However, she did not resume her prior outside employment. Her injury left her with permanent partial impairment.
The issue presented in this case was whether the Township owed Kocanowski temporary disability benefits following her injury in March 2015. Kocanowski argued that she was entitled to temporary disability benefits based on the maximum rate set forth in N.J.S.A. 34:15-75, the provision dealing with rates for volunteer firefighters and EMTs. The Township argued that she was not entitled to temporary disability benefits because she had no lost wage to replace. The Judge of Compensation and the Appellate Division both held that Kocanowski was not entitled to temporary disability benefits at all since she had not worked in over a year prior to her injury and had no offer of employment.
The New Jersey Supreme Court issued its decision on February 19, 2019. The decision focused on the legislative intent to encourage volunteerism in passing N.J.S.A. 34:15-75. This statute reads:
“Compensation for injury and death, either or both, of any volunteer fireman . . . (or) emergency management volunteer doing emergency management service . . . shall:
1. Be based upon a weekly salary or compensation conclusively presumed to be received by such person in an amount sufficient to entitle him (or her) or, in the event of his (or her) death, his (or her) dependents, to receive the maximum compensation by this chapter authorized. . .”
The Supreme Court reversed the decision of the Appellate Division: “As such, we find N.J.S.A. 34:15-75 authorizes all volunteer firefighters injured in the course of performing their duties to receive the maximum compensation permitted, regardless of their outside employment status at the time of the injury.”
The Court rejected the argument of the defense that all claims for lost wages must meet the test set forth in N.J.S.A. 34:15-38. Defense argued that the words “by this chapter authorized” at the end of N.J.S.A. 34:15-75 refers to the entire workers’ compensation statute. The provision dealing with temporary disability benefits is N.J.S.A. 34:15-38. That section requires temporary disability benefits be paid from the day the employee is first unable to work due to the accident up to the first working day that the employee is able to resume work. Defense suggested that this petitioner could not meet the test in N.J.S.A 34:15-38 because she had no work.
The Court responded by pointing out the prior to the passage of N.J.S.A. 34:15-75 in 1952, volunteer firefighters who were unemployed were entitled to temporary disability benefits even though N.J.S.A. 34:15-38 existed. The rules for all other employees were not applied to volunteers. In essence, the Court ruled that the New Jersey Legislature clearly never intended statutory volunteers to be subject to the law that applies to all other employees in New Jersey. The reason for this exemption was to encourage volunteerism.
The Court’s decision failed to address one important question raised in oral argument, namely whether this ruling would mean that an 18-year-old high school volunteer firefighter injured in 2019 with no outside employment would be entitled to $921 per week while receiving authorized treatment and attending full-time high school classes. The decision in Kocanowski suggests that this high school volunteer must be paid $921 per week while actively treating until reaching maximal medical improvement, notwithstanding the obvious windfall to the student and the cost to the municipality.
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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.