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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 inDonatello 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 inDorflaufer.
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, 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.