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Plaintiff’s UM/UIM Claim Found To Be Barred Due To Plaintiff’s Failure To Sue Tortfeasor Within Statute Of Limitations

Plaintiff Sang Park was rear ended by a vehicle driven by the defendant Michelle Wragge on January 11, 2018.  As a result, Park claimed to have suffered painful injuries from the collision.  Thereafter, on June 1, 2018, Park, filed a complaint against GEICO (her insurance company) for uninsured or underinsured motorist coverage benefits (UM/UIM). But, the plaintiff did not move to amend her complaint to add the defendant Wragge until November 18, 2019 and did not file the Amended Complaint against Wragge until February 12, 2020, after the two year statute of limitations had run.  The issue in Park v. Government Employee’s Insurance Co., 2021 N.J. Super. Unpub. LEXIS 1303 (App. Div. June 29, 2021), was whether plaintiff’s UM/UIM claim against GEICO was barred because of her failure to preserve GEICO’s subrogation rights against the defendant tortfeasor Wragge due to her failure to timely file suit against Wragge.

At the trial court level, GEICO filed a motion to dismiss plaintiff’s UM claim against it because of Park’s failure to amend the complaint against Wragge until after the statute of limitations ran.  The trial court ruled that plaintiff’s UM complaint against GEICO should be dismissed with prejudice because of plaintiff’s failure to protect GEICO’s subrogation interests against the defendant tortfeasor.  This appeal ensued. 

The Appellate Division pointed out that the relationship between an insured and its insurance carrier is contractual but the obligation to offer UIM coverage is statutory.  A UIM carrier that pays benefits to an insured has the right to subrogate against the tortfeasor for the monies that paid to its insured.  Under New Jersey case law, “[t]o effectuate this right, a UM carrier may intervene in an insured’s trial against a tortfeasor as a way to avoid relitigating the insured’s claim and bind the tortfeasor to the issues decided at trial.”

The Appellate Division pointed out that the plaintiff’s insurance policy here was clear and unambiguous.  It required that the plaintiff protect GEICO’s subrogation rights, which the plaintiff failed to do by not filing suit against Wragge within the applicable statute of limitations.

The plaintiff argued that she was entitled to the protection of the relation back doctrine.  However, the Court found that the plaintiff did not establish the requirements necessary to benefit her under that theory.  This doctrine is governed by court rule, R. 4:9-3.  Based upon this rule, when a plaintiff adds a new party after the statute of limitations has run “she must establish: (1) the claim asserted in the Amended Complaint arose from the same conduct, transaction or, occurrence alleged in the original; (2) the new defendant had notice of the potential complaint prior to the expiration of the SOL so as not to be prejudiced in maintaining a defense; and (3) the new defendant knew or should have known that, but for the misidentification, the action would have been brought against him or her.”

The Appellate Division ruled that the plaintiff’s complaint did not relate back, because although her UM claim arose from the accident, plaintiff pleaded a completely new cause of action against Wragge.  As the Court pointed out, the relation back rule does not authorize amendment of the pleading to allege a new cause of action against another party to the litigation which is barred by the running of the statute of limitations.

The Appellate Division held that the plaintiff should have initiated her suit against Wragge while filing her UM claim.  Further, the plaintiff should have kept GEICO apprised as to her progress in the case against Wragge, including any arbitration or settlement offers.

The Court noted that GEICO had subrogation rights in plaintiff’s suit against Wragge regarding benefits it paid to plaintiff, which the plaintiff had the obligation to preserve.  Thus, GEICO did show that it suffered significant prejudice by being unable to subrogate a claim against Wragge (based upon that claim being barred by the statute of limitations). 

The Appellate Division held that “plaintiff extinguished any right of subrogation GEICO may have had against Wragge by failing to file a lawsuit that GEICO could have assumed control of after compensating her.”  Thus, the Court found that this “irretrievable loss of those rights resulted in a forfeiture of coverage.”  Hence, the Appellate Division affirmed the trial court’s decision dismissing the plaintiff’s complaint against the defendant GEICO with prejudice.

Plaintiff Able to Obtain Full Recovery of Verdict Against Defendant Tortfeasor Found to be 60% Negligent in Auto Case

The issue in the published Appellate Division decision in Carbajal v. Patel, 2021 N.J. LEXIS 73 (App. Div. June 2, 2021), was whether a plaintiff can obtain a full recovery of a jury verdict against a defendant found to be 60% negligent, when that defendant is unable to obtain contribution from the co-defendant found to be 40% negligent. The jury found the defendant Nancy Patel to be 60% negligent and the driver of a phantom vehicle to be 40% negligent in causing the automobile accident in which the plaintiff suffered injuries. The problem, however, was that the coverage for the phantom vehicle was under the plaintiff’s uninsured motorist (“UM”) coverage and the amount of the UM policy limits were insufficient to cover the 40% of the jury verdict.

The jury awarded the plaintiff $200,000 in damages, with 60% responsibility assessed against defendant Patel and 40% responsibility assessed against the driver of the phantom vehicle. Under the Comparative Negligence Act (“CNA”), a plaintiff is entitled to full recovery of damages from a defendant found at least 60% at fault. Under the Joint Tortfeasors Contribution Law (“JTCL”), that defendant can then turn around and seek contribution from the amount paid in excess of his or her pro rata share from other joint tortfeasors also found at fault.

However, in this case, through no fault of the plaintiff, Patel was unable to obtain full contribution directly from the UM insurance carrier because the UM policy limits were only $15,000. After the verdict was rendered, the trial court judge molded the verdict and required Patel to pay 60% ($120,000) and ordered the UM insurance carrier to pay plaintiff $15,000, its UM policy limit. However, that shortchanged the plaintiff by $65,000, the balance of the jury’s $200,000 verdict.

The Plaintiff appealed this decision, arguing that a judgment should be entered allowing him full recovery, despite Patel’s inability to collect the 40% from the UM carrier. The Appellate Division agreed with the Plaintiff that he should have been permitted to obtain the entire award from Patel because she was found 60% responsible for the accident. The CNA permits a responsible defendant who pays more than his or her pro rata share to pursue other joint tortfeasors also at fault. However, the Court found that the other tortfeasor who was at fault was the driver of the phantom vehicle, not the UM insurance company.

Thus, the Appellate Division held that, despite Patel’s inability to obtain contribution in excess of her pro rata share of the jury verdict from the co-defendant UM carrier, Patel was still responsible to pay for the full verdict, less the UM insurance company’s policy limits of $15,000.

Respondent Prevails Where First MRI Post-Accident Showed No Abnormalities In Knee

What happens when an injured worker gets a normal MRI study after a work injury but later on a second MRI shows an operable tear? Can the findings on the second MRI be related back to the original injury?  The Appellate Division addressed that issue in Costanzo v. Meridian Rehab, A-5547-18 (App. Div. June 17, 2021). 

Patricia Costanzo slipped and fell on April 1, 2016 while working at Meridian Rehab as a recreational aide. She felt pain in her left knee and underwent an MRI, which showed no tear and no fracture. It did show some prior osteoarthritis in the knee.  Respondent paid for PT and a series of injections, and petitioner returned to work thereafter.  She had a subsequent injury in August 2017 while walking on a beach (unrelated to work) and injured her right knee, requiring a meniscectomy.

The issue in this case arose when petitioner started feeling increased pain in her left knee in January 2018 and underwent a second MRI for the left knee.  She denied reinjuring the left knee in the beach incident that injured her right knee.  On this new 2018 left knee MRI, an anterior cruciate ligament tear and a meniscal tear could be plainly seen.  Petitioner filed a motion for medical benefits for the left knee tear seeking payment from Meridian Rehab for surgery.  Capehart Shareholder, Carla Aldarelli, Esq., handled this case successfully for Meridian Health System.

Petitioner’s expert, Dr. Cary Skolnick, testified that the new tears in the left knee were related back to the original accident of April 1, 2016.  He stated that the action of striking the ground caused petitioner’s arthritis to worsen to the point where additional treatment was needed.  Further, he opined that both the meniscus and ligament were stretched in the 2016 incident to the degree that only a few fibers were holding them together and those fibers eventually broke.

In contrast, the Judge of Compensation credited the testimony of Dr. Shawn Sieler, who diagnosed only a left knee contusion in the April 2016 fall.  Dr. Sieler testified that petitioner fully recovered from this incident.  Dr. Sieler was of the opinion that the meniscal and ACL tears “can only be explained by some subsequent traumatic accident.”  He did not accept Dr. Skolnick’s theory about fibers in the knee being stretched to a breaking point.  He noted that if arthritis was a factor, there was evidence before the April 2016 incident of arthritis in the knee.

The Honorable Salvatore Martino, Judge of Compensation found Dr. Skolnick’s testimony to be lacking in both credibility and logic.  The judge observed that Dr. Skolnick did not directly address some questions posed to him, and he became somewhat argumentative with respondent’s attorney.  Judge Martino said, “While it is clear that more severe pathology currently exists as compared to the time period closer to the injury date, there does not appear to be a reasonable connection between the mechanism of the injury and the current state of her pathology.”  The judge found Dr. Sieler’s testimony on lack of causation to be more credible because it was more consistent with the order of the MRIs.

Petitioner appealed and argued that Judge Martino erred in assessing Dr. Skolnick’s credibility.  The Court wrote, “Contrary to petitioner’s contentions on appeal, there was ample evidence in the record to support the judge’s conclusion that the current condition of petitioner’s left knee was not related to the injury she suffered when she fell at work in April 2016.  At that time, petitioner suffered only a contusion. The MRI taken in June 2016 revealed no meniscus tear and no ACL tear.  Although the MRI showed that petitioner had arthritis in the knee, this was a preexisting condition.”

For these reasons, the Appellate Division endorsed the conclusion of Judge Martino that there was no medical evidence that the arthritis in petitioner’s left knee had worsened as the result of the April 2016 fall. 

The argument in this case occurs quite frequently in workers’ compensation.  While every case is fact sensitive, the general rule for practitioners should be that when there are two MRIs that are vastly different from each other, the MRI closest in time to the work accident will generally control.  If a subsequent MRI shows findings that did not appear in the first MRI close to the time of accident, it makes little sense to draw causation. 

The analogy would be to a car that has a few tiny nicks on the windshield.  A minor car accident occurs at some point and a photo taken a few weeks after the accident shows no change in the windshield at all.  The nicks are exactly as they were. Two years later the owner gets in the car one morning and is shocked to find that there are now giant cracks all over the windshield.  The entire windshield needs replacement.  Under Dr. Skolnick’s theory, the minor car accident would be responsible as opposed to some other intervening event during the past two years.   While anything is possible, the legal standard remains more likely than not.   Under Dr. Sieler’s logic, the dramatic change in the windshield would be more likely due to some intervening event.

The post Respondent Prevails Where First MRI Post-Accident Showed No Abnormalities In Knee appeared first on NJ Workers' Comp Blog.

Appellate Division Holds That Public Employee Injured In Shared Parking Lot With Employees And The Public Is Not Covered For Workers’ Compensation Purposes And Can Sue Her Employer

When an employee is injured on the employer’s premises, including a parking lot owned and controlled by the employer, it is fundamental that such a claim is work related.  If this injury is caused by the actions of another employee, it is also fundamental that the two employees cannot sue each other or their employer in negligence.  Given these well-established rules, the published Appellate Division decision in Lapsley v. Township of Sparta, A-0958-19T3, (App. Div. January 29, 2021) is a real head scratcher.

Diane Lapsley worked as a librarian for the Township of Sparta.  The library sits within a municipal complex including three common-use parking lots, a baseball field, and the offices of the Sparta Township Board of Education. Petitioner could park in any of the lots.  On February 3, 2014 the library closed early on account of weather conditions, and petitioner’s husband came to pick Ms. Lapsley up.  Petitioner stepped off the library curb and walked about 18 feet into the lot when a township Public Works employee drove a snowplow into Mr. and Mrs. Lapsley.  Petitioner suffered serious injuries and required multiple surgeries. 

Ms. Lapsley brought a civil suit alleging negligence against the Township of Sparta and its Department of Public Works.  The Township moved to dismiss the suit because the exclusive remedy for an injured worker arising out of work is in the Division of Workers’ Compensation.  The case eventually moved to the Division of Workers’ Compensation for a determination of compensability. The Judge of Compensation found that the injury was compensable. The reasons were sound:  the Township owned, maintained and controlled the parking lot where the accident occurred.  

Petitioner appealed and argued that her injury was not compensable because it did not arise from her employment and because she was not engaged in any task for her employer’s benefit when the injury occurred.  The Appellate Division reviewed the relevant law in N.J.S.A. 34:15-36, which states that “employment … shall be deemed to commence when an employee arrives at the employer’s place of employment to report for work and shall terminate when the employee leaves the employer’s place of employment, excluding areas not under the control of the employer ….”  This is the provision that the Judge of Compensation properly relied on.

Nonetheless, the Appellate Division reversed the decision of the Judge of Compensation and found that Ms. Lapsley was not within the scope of her employment when she was injured.   Even though the Court acknowledged that the Township owned the parking lot next to the library where petitioner was injured, the Court based its decision on certain considerations seemingly never cited before by any other court.  The Court said, “It was stipulated that petitioner was off-the-clock at the time of the accident and exited the library premises.”  But the Supreme Court decision in Ramos v. M & F Fashions specifically noted that New Jersey has no clock in or clock out rule.  Employees often linger at work long past the end of their day and arrive at work long before they may clock in, but nonetheless they are covered for purposes of workers’ compensation once they reach the work premises unless they deviate from employment.

The Court next relied on another principle not found within the New Jersey Workers’ Compensation Act. “Library employees were not given any instructions about where in the subject lot to park or indeed whether to park in that particular lot, on the street, or anywhere else in town where parking may be available.  Nor were library staff instructed on the manner of ingress or egress.”  To this practitioner’s knowledge, there are no published cases that have ever restricted the premises rule to a need to instruct employees about parking in public lots.  This petitioner was on the adjacent parking lot to the building where she worked when she was injured. The Court seems to be saying that since the Township did not require petitioner to park in that particular lot, and she could have parked elsewhere, her injury was not compensable.  This seems illogical.

The last point which the Court made was that the lot was shared with other municipal employees and members of the public alike. The Court postulated, “Thus, the stipulated facts established that petitioner’s employer exercised no control of its employee’s use of the subject lot, that control being a critical element of the premises rule’s application.”  This comment misses the emphasis in the statute on the words, “excluding areas not under control of the employer.”  It is not the employee’s use of the lot that matters but the employer’s control of the lot that the employee is injured on.

This is a reported decision and therefore it must be studied by practitioners and evaluated.  What this decision meant is that a badly injured worker was able to get around the exclusive remedy provision in order to sue her employer and make a much greater financial recovery.  From the employer standpoint, and public employers in particular, this case would expose employers to extremely costly civil litigation.  The exclusive remedy should have been applied here, and the Judge of Compensation was clearly correct.

From the employee standpoint, the case raises a number of alarming questions.  Does it mean that New Jersey employees lose workers’ compensation coverage when they “clock out?”  The Supreme Court has already stated that clocking in or out is not a precondition for employment coverage.  Does it mean that injured workers lose coverage when they are injured on a public lot simply because the public lot is shared by fellow employees and the public?  All municipal parking lots are shared by employees and the public.  Why would that matter?  Does it mean that a public employer is not liable for injuries in its own parking lot if it has not instructed employees on the manner of ingress or egress?   

In short, for both employers and injured workers, the Lapsley case is singularly problematic. Its rationale does not square with any prior decisions.

The post Appellate Division Holds That Public Employee Injured In Shared Parking Lot With Employees And The Public Is Not Covered For Workers’ Compensation Purposes And Can Sue Her Employer appeared first on NJ Workers' Comp Blog.

Appellate Division Affirms Dismissal of Occupational Tinnitus Claim

There are not many Appellate Division decisions on occupational hearing loss and tinnitus, which is why the decision is of interest in Donzella v. SG Performance Plastics Corp., A-2408-19T3 (App. Div. January 12, 2021). 

The case involved an employee of SG Performance who worked at its manufacturing warehouse in August 2015.  He and 30 other employees worked around multiple machines.  He wore eyeglasses and gloves but no hearing protection.

One month after beginning his employment, Donzella went to St. Joseph’s University Medical Center in Paterson and stated that he was very dizzy.  He was given Meclizine for treatment of motion sickness and vertigo.   He never returned to work at SG Performance but did eventually get a job in 2017 at the State of New Jersey Water Commission.

Petitioner saw Dr. Festa, an ENT physician, who noted petitioner’s hearing levels were normal.  Next he saw another ENT, Dr. Samadi, who diagnosed bilateral tinnitus and sensorineural hearing loss.  He later added a diagnosis of a deviated nasal septum. 

Petitioner filed a claim petition on November 10, 2015 for his dizziness, vertigo and hearing loss.  He amended the CP nearly two years later to allege occupational exposure to excessive noise from August 3, 2015 through September 30, 2015.  Petitioner was seen by Dr. Gerald West, another ENT, who diagnosed tinnitus due to extreme noise exposure in 2015.  Dr West estimated 25% permanent partial disability for tinnitus but noted that the petitioner’s hearing was within normal limits.

Respondent retained Dr. Steven Freifeld, who observed that petitioner still complained of bilateral hearing loss and sensitivity to noise as of September 2018.  However, his dizziness had abated.  Dr. Freifeld felt that there was no hearing loss and found that his symptoms were not work related.

The experts in this case did not testify but their reports were introduced into evidence in lieu of testimony.  This procedure is known as a trial on reports.  The Judge of Compensation did not find petitioner’s testimony to be credible on certain points.  The judge commented that petitioner described the machines as being loud but admitted that he could hear directions and instructions from his supervisor if the supervisor raised his voice.  Furthermore, the judge observed that neither Dr. Festa nor Dr. Samadi commented on causation between work and his symptoms. Finally the judge said, “there was no data, study or reference of any kind to suggest that this condition was caused by the limited noise exposure.”

In ruling for the respondent, the Judge of Compensation found Dr. Freifeld to be the most credible of all the ENT physicians in this case.  The judge accepted Dr. Freifeld’s opinion that petitioner had vestibular neuronitis, a condition that can happen to someone at any point in time.  The judge found no evidence causally relating this condition to work.

The Appellate Division deferred to the expertise of the Judge of Compensation and affirmed the dismissal of the case because there was ample evidence to support the decision below.  The case underscores that in any occupational hearing loss or tinnitus case, there must be a record established of specific work conditions, such as decibel levels, in tandem with consideration of medical studies or data connecting fairly common conditions like tinnitus or noise sensitivity to the specific work conditions.

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Lost Profits Claim Barred Under New Business Rule

In the legal malpractice case, Schwartz v. Menas, 2020 N.J. Super. Unpub. LEXIS 2104 (App. Div. Nov. 6, 2020), the Appellate Division was faced with an appeal over whether the trial court properly barred plaintiffs’ expert reports supporting claims for lost profits as too speculative under the “new business rule.” Plaintiff Larry Schwartz and his company (NJ 322, LLC) sued their attorneys over what they claimed was a real estate development project that never materialized due to the alleged malfeasance of their attorneys, claiming lost profits as a result.

One of the issues in the case as to damages was whether Plaintiffs could pursue a claim for lost profits based upon this new venture. Plaintiffs produced an expert report to support their lost profits claim, which the trial court barred on the basis of the “new business rule.” Summary judgment was also granted to the defendants and this appeal ensued.

The Appellate Division noted that lost profits are a measure of compensatory damages and they are recoverable “if they are capable of being established to a reasonable degree of certainty.” Under the Supreme Court new business rule, however, “prospective profits of a new business are considered too remote and speculative to meet the legal standard of reasonable certainty.”  While other jurisdictions have abandoned this rule, the Court felt bound by prior Supreme Court precedent to continue to apply it as the law in this State.           

Here, Schwartz had never previously undertaken responsibility for a major residential development project that he envisioned for the properties he purchased. He had no experience at all in this type of venture. The Court noted that he was definitely engaging in an entirely new business from his role in the few prior rehab projects he had performed. The Appellate Division found that “[b]ecause Schwartz was unquestionably a new business within the intendment of the governing case law, his claim for lost profits was not permitted by the new business rule.”            

Based upon the application of this rule, the Appellate Division upheld the trial court’s orders barring Plaintiff’s expert reports and, thus, without being able to prove damages, the summary judgment dismissal as to his claims was upheld.

Respondents Can Reopen Cases Too

Employers and workers’ compensation professionals are very familiar with reopener petitions or applications for modification of awards.  A reopener may be filed by the petitioner within two years of the last payment of indemnity benefits or the last authorized treatment date, but not many workers’ compensation professionals realize that employers can also apply for modification of awards.  The pertinent statute, which is N.J.S.A. 34:15-27, allows both employees and employers to file such applications for modification.

When would a respondent move to reopen an award? Suppose the petitioner receives an award of 100% permanent and total disability benefits for physical injuries asserting that he or she can never work again.  Six months after the award is entered, respondent becomes aware that the petitioner is in fact working in a very physical job and can document this fact.  What can the employer do?  The proper step would be to file an application to modify the award, suspend benefits altogether, and pursue any other remedies such as a potential finding of fraud.  That is why Section 27 is so important.  An employer cannot simply stop making payments when there is a court order to do so.  The remedy is to reopen the prior award under Section 27 and file a motion for specific relief.

Consider also a situation where an injured employee receives a very large partial permanent disability award, perhaps 60% paid over 360 weeks.  The large award was influenced by testimony at trial that the injured employee was not able to return to work.  Subsequent investigation reveals that the injured employee has returned to a physical job with even higher wages than at the time of the accident.  Just because the prior award was not for total and permanent disability benefits does not mean that the employer cannot move to modify the award of 60% to a lower percentage.  It is important for workers’ compensation professionals to understand that reopeners can work both ways:  the percentage of award can rise or it can fall.

Lastly, consider a case where the reason for the relatively high award is that the judge is concerned with the employee’s need for ongoing narcotics to reduce pain.  From the date of the accident to the date of the award the employee has been taking prescription narcotics for pain, and the award provides for ongoing use of prescription opioids.  Thereafter respondent’s pain medicine physician does testing noting that the injured worker is not even taking opioids.  The urine tests show no evidence of any narcotics in the petitioner’s system, and the petitioner advises that he or she feels much better and does not need the narcotics any longer.  This would also be an appropriate case to file a modification downward of the prior award.

So Section 27 modifications are premised on this equitable concept:  when the claimant’s condition has worsened, he or she can apply for a higher award; when the condition has improved, the employer can apply for a lower award.

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Supreme Court Rules That Made-Whole Doctrine Does Not Apply To A Self-Insured Retention

In the lawsuit of City of Asbury Park v. Star Insurance Co., 2020 N.J. LEXIS 746 (June 29, 2020), the Supreme Court addressed a question of New Jersey law at the request of the United States Court of Appeals for the Third Circuit.  The question that was asked was “whether, under equitable principles of New Jersey law, the made-whole doctrine applies to first-dollar risk that is allocated to an insured under an insurance policy, i.e., a self-insured retention or deductible.”  This question arose from a dispute between a workers’ compensation carrier and its insured who is a public employer.

The City of Asbury Park (“the City”) had an insurance policy with Star Insurance Company (“Star”) that provided workers’ compensation coverage for claims against the City.  The policy included a self-insured retention of $400,000 per occurrence.  Star agreed to indemnify the City for its workers’ compensation claims that exceeded the self-insured retention.

In January 2011, John Fazio (“Fazio”), an employee of the Asbury Park Fire Department, was injured while fighting a fire.  He filed a workers’ compensation claim against the City, which paid him $400,000, the full amount of its self-insured retention limit.  Star paid him $2,607,227.50, which was the amount exceeding the self-insured retention limit. 

Subsequently, Fazio filed a third-party action for the injuries he suffered in the fire.  He and the third-party settled for $2,700,000.  Subsequently, Fazio, the City and Star agreed that $935,968.25 of the settlement proceeds would be set aside to partially reimburse the City and Star for its workers compensation lien.

Star demanded that it be paid the entire amount of $935,968.25, claiming that it was entitled to be reimbursed in full before the City could recover amounts paid on its self-insured retention.  The City claimed that under the made-whole doctrine, it was entitled to be reimbursed in full before Star could assert its subrogation right.  Star claimed that the made-whole doctrine does not apply to self-insured retentions and that an application of that doctrine would unjustly enrich the City. It argued that the application of this doctrine would essentially convert the policy into first-dollar coverage, which is not what the City paid for in premiums.

The City filed a declaratory judgment action against Star in the District Court of New Jersey.  That Court granted summary judgment in favor of Star, finding that “the City has no insurance coverage for the first $400,000” and that the parties expressly agreed that under the subrogation provision in the policy that Star had the right to substitute itself for the City and is subrogated to all the City’s rights of recovery and that the made-whole doctrine does not apply to the case.

The City appealed and the Third-Circuit certified its question to the Supreme Court as an important and unresolved matter of New Jersey law. 

The New Jersey Supreme Court noted that the funds that would be available for reimbursement would not cover the full amount paid collectively by the City and Star.  The question that was posed to the Supreme Court would be whether the City had priority to recover what it paid before Star may recover any of its losses. The Supreme Court accepted the question as posed and answered the certified question in the negative.

The question turned on the interplay between the made-whole doctrine and the provision in the contract between Star and the City under which the City agreed to retain a self-insured retention, a per occurrence deductible for workers’ compensation claims.  Based upon that self-insured retention, the City bears what is known as the “first dollar risk,” making it responsible for the first $400,000 of a workers’ compensation claim with Star being responsible for sums exceeding that amount.  The policy also contained a subrogation provision which stated that “the insurer shall be subrogated to all of the insured’s rights of recovery…” 

The Supreme Court noted that under the made-whole doctrine “an insurer cannot assert a subrogation right until the insured has been fully compensated for his or her injuries.”  This doctrine applies when the insured’s parties damages exceed the amount of funds from which a recovery may be had or, in other words, when the amount recoverable from the responsible third-party is insufficient to satisfy both the total loss sustained by the insured and the amount the insurer pays on the claim.  Under these circumstances, the made-whole doctrine would hold that “the injured party should be the first to tap into the limited pool of funds and recover on any loss and when someone cannot be fully paid, the loss should be borne by the subrogee, the insurer.” 

The Supreme Court noted that the New Jersey courts have long recognized and utilized the made-whole doctrine.  However, it also noted that the New Jersey courts have never addressed the question of whether the doctrine applies to first dollar risk, such as deductibles and self-insured retentions borne by insureds. 

The Court considered the equitable principles that guide the doctrine of subrogation alongside insurance policies that allocate first dollar risk to the insured and found “that the made-whole doctrine does not apply to first dollar risk allocated to the insured.”  It found that “a self-insured retention or deductible is an amount of risk that the insured has agreed to assume in exchange for a lower premium cost for the insurance policy.”  Further, it held that where there is an award from a subrogation action against a third-party and it is insufficient to reimburse both the insured’s self-insured retention and the carrier’s loss in excess of that retention, “to place priority of recovery with the insured would, in effect, convert the policy into one without a self-insured retention.”

The Court’s view of the made-whole doctrine requires a close examination of the insurance contract’s provisions to determine whether the doctrine would apply. The provisions relating to self-insured retentions or deductible and subrogation rights would need to be read together. 

Here, the policy unambiguously provides Star with all of the City’s rights to recover against third-party tortfeasors in the event that Star makes a payment under the policy.  Accordingly, the Supreme Court found that the made-whole doctrine would not apply in these circumstances.  This doctrine would not override the party’s agreement. 

Thus, the New Jersey Supreme Court reached the conclusion that under equitable principles of New Jersey law, “the made-whole doctrine does not apply to first dollar risk, such as a self-insured retention or deductible that is allocated to an insured under an insurance policy.”

Jurisdictional Issue in Med Mal Decision In New Jersey May Presage Likely Dismissal of MCP Cases Arising from New York Injuries and New York Employment

In 2020 we will likely get a published Appellate Division decision that resolves whether a medical provider can bring a medical claim petition in New Jersey where virtually all contacts are in New York State except for where the surgery occurs and sometimes where the claimant lives.  One hint of how the Appellate Division may lean comes from a recent medical malpractice case entitled Pullen v. Dr. Aubrey Galloway, A-1373-18T2 (December 9, 2019). 

The case involved jurisdictional issues between New Jersey and
New York in connection with a law suit filed by the widower of Jeanne Pullen,
who underwent surgery in New York City to replace her aortic valve but died
shortly thereafter.  Mr. Pullen, the
widower, filed a medical malpractice case against Dr. Aubrey Galloway who
performed the surgery at NYU Langone Medical Center in New York City.  Dr. Galloway practiced only in New York and
saw patients only in New York.

The decedent lived in New Jersey and her widower filed the
medical malpractice case in New Jersey. 
The decedent was referred to Dr. Galloway by her New Jersey licensed
physician, Dr. Edwin Blumberg. Dr. Galloway argued that there was no
jurisdiction over him in New Jersey. He had been licensed to practice in New
Jersey between 2004 and 2009 but he had never actually practiced in New Jersey.

Pullen countered that the New Jersey referring doctor, Dr.
Blumberg, had a personal friendship with Dr. Galloway.  He also argued that Dr. Galloway solicited
business through commercials and local television stations.

The trial court dismissed the lawsuit for lack of
jurisdiction in New Jersey over Dr. Galloway. 
The Appellate Division said, “General
jurisdiction exists when the plaintiff’s claims arise out of the defendant’s
continuous and systematic ‘contacts with the forum state.’”  The Court added, “Applying these
well-established standards, Dr. Galloway is not subject to personal
jurisdiction in New Jersey. Dr. Galloway does not have continuous and
substantial contacts that would subject him to general jurisdiction in New
Jersey.  Dr. Galloway lives and practices
medicine in New York.  He certified that
he had a New Jersey medical license only between 2004-2009 and never actually
practiced medicine in New Jersey.”

The Court also rejected the allegation that Dr. Galloway
should be subject to jurisdiction in New Jersey because he advertised on local
television stations.  “Plaintiff did not
identify any actual advertising on local television stations.  Instead, plaintiff merely asserted that Dr.
Galloway had engaged in such advertisement. 
That contention is not supported by any specific facts such as the
nature of the advertising, when and where the advertising was actually aired,
and whether the advertisement was directed at New Jersey residents.”

The Court added, “We have previously held that a doctor’s out-of-state treatment of a New Jersey resident does not, in and of itself, establish personal jurisdiction.  Bovino v. Brumbaugh, 221 N.J. super. 432,437 (App. Div. 1987).  In Bovino, we explained that when a patient seeks personal services from an out-of-state physicians those services are not directed towards a particular place; rather, they are directed at the needs of the patient.  In that regard, we noted that it is fundamentally unfair to subject an out-of-state physician to jurisdiction in New Jersey when treatment is provided exclusively in another state.”

The reason this case is important is that in there are many
hundreds of MCP cases pending in New Jersey involving New York accidents to
largely New York residents who work in New York.  The only contact with New Jersey occurs when the
surgeon decides to schedule the main medical procedure in the State of New
Jersey where there is no fee schedule —  unlike New York.  All the treatment up to surgery has occurred
in New York State, the employment contacts are in New York, yet the surgical
procedure is shifted to New Jersey solely to avoid the New York fee schedule.
When the carrier and employer insist on paying the surgeon under the New York
fee schedule, the medical provider hires a New Jersey law firm who files a
Medical Claim Petition in the New Jersey Division of Workers’ Compensation to
get paid the difference between the New York fee schedule and the bill for the
procedure.

It would seem under the rationale in Pullen to be completely insufficient for the Division of Workers’ Compensation to accept jurisdiction over the fee dispute in a situation like this where all the contacts were in New York. There are no continuous or systematic contacts with New Jersey, to quote the decision in Pullen.

Thanks to David Lustbader, a prominent New Jersey practitioner, for sending this case to our attention.

The post Jurisdictional Issue in Med Mal Decision In New Jersey May Presage Likely Dismissal of MCP Cases Arising from New York Injuries and New York Employment appeared first on NJ Workers' Comp Blog.

Court Rules That Plaintiff Unable To Seek PIP Coverage For Unpaid Medical Expenses Under Policies Issued By Insurance Companies To Tortfeasor’s Resident Relatives

Plaintiff Raymond Nesby was injured in an automobile accident when his car was struck from behind by the vehicle driven by defendant Sheryl Fleurmond, whose vehicle was owned by defendant Chris Decaro and insured by Progressive Garden State Insurance Company.  Fleurmond did not own a vehicle nor have her own automobile insurance policy.  However, she lived with her mother and sister who were insured by Geico and AAA MAIC (AAA Mid-Atlantic Insurance Company), respectively.  Neither vehicle, however, was involved in the accident.  The issue in the published decision of Nesby v. Fleurmond, 2019 N.J. Super. LEXIS 162 (App. Div. November 18, 2019) was whether the plaintiff, who had a limited $15,000 PIP coverage but incurred $400,000 in medical bills, could recover the remainder of his medical bills from the two insurance policies issued to the defendant Fleurmond’s relatives.

After the plaintiff’s $15,000 personal injury protection benefits were exhausted, the rest of his medical bills were paid by his personal health insurance company.  He tendered his bodily injury claim to Progressive (the defendant Decaro’s carrier), which offered him the full $25,000 policy limit.

The plaintiff accepted that offer and signed a release, which released both Fleurmond and Decaro from any and all claims, actions, causes of actions, which in any way resulted from the automobile accident.

Sometime before signing the release, plaintiff’s counsel sent what he described as a “Longworth letter” to Geico and AAA MAIC, notifying the carriers of Progressive’s offer.  Although neither carrier objected to the proposed settlement, both later denied coverage.

Thereafter, plaintiff filed a law suit against Fleurmond and Decaro, seeking damages for injuries he suffered in the accident.  Although he did not specifically name Geico or AAA MAIC as defendants, the Fourth Count of his Complaint sought to compel insurance coverage from both carriers.  Prior to beginning discovery, the plaintiff moved for a declaratory judgment against Geico and AAA MAIC, seeking coverage under the policies issued to Fleurmond’s sister or mother.  Geico and AAA MAIC cross-moved for the same relief. 

The trial court judge found that plaintiff had settled his claims with Fleurmond and Decaro and had no relationship with Geico and AAA MAIC, which would otherwise entitle him to coverage under their policies.  Because plaintiff was not seeking underinsured motorist coverage from these insurance carriers, the trial court judge found that the Longworth case was inapplicable and distinguishable from the facts of this case.

On appeal, the plaintiff argued that he was entitled to PIP coverage and bodily injury benefits under the Geico and AAA MAIC policies.  The Appellate Division disagreed.

Starting with the plaintiff’s claim for PIP coverage under the policies, the Court noted that plaintiff was not an insured under the Geico or AAA MAIC policies, did not live with either insured and was not driving a vehicle insured under either policy.  Thus, he did not fall under any category which might entitle him to PIP benefits under either of these policies.

Further, the Appellate Division noted that New Jersey does not permit “stacking” of policies for PIP benefits.  To the contrary, N.J.S.A. 39:6A-4.2 expressly prohibits an insured from recovering PIP benefits from multiple policies.

Further, the Appellate Division pointed out that the plaintiff settled his claims with Fleurmond and Decaro and fully released both of them (the tortfeasor and the owner of the vehicle) from any and all claims arising from the accident.  The Court noted that where a release’s language refers to “any and all claims,” courts do not generally permit exceptions.  Because the release did not preserve plaintiff’s right to proceed against either Geico or AAA MAIC, the Appellate Division found that he could not continue to litigate his settled claims against the insurers. 

As to the plaintiff’s reliance upon Longworth, the Appellate Division noted that such reliance was “misplaced.”  The Longworth case pertains only to protecting the UIM carrier’s subrogation interest.  However, the plaintiff acknowledged that he was not seeking UIM coverage from either Geico or AAA MAIC.  Thus, any reservation of rights under Longworth provided him no relief.

To the contrary, the plaintiff was seeking excess insurance under the Geico and AAA MAIC policies.  However, the Appellate Division found that the plaintiff had released the tortfeasor without a reservation of rights clause protecting his claims against those insurers.            

In summary, the Appellate Division found that the plaintiff was not a named insured under the Geico or AAA MAIC policies.  He did not reside with the named insureds, did not occupy a vehicle insured under those policies and released the tortfeasor from any and all claims arising from the accident.  Thus, the Court ruled that his claims against these insurers failed.  Hence, the Appellate Division affirmed the trial court decision, dismissing the claims against both Geico and AAA MAIC.

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