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New Jersey Rules Per Quod Claims Are Not Lienable

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New Jersey Rules Per Quod Claims Are Not Lienable

In an important decision affecting the rights of employers in New Jersey, the Appellate Division ruled that a per quod claim is not lienable in Weir v. Market Transition Facility, 318 N.J.Super. 427 (App.Div. 1999). Before discussing the details of this case, it is important to understand the basic principles of liens and reimbursement rights in New Jersey. This state has a strong policy against double recoveries. Thus, if a worker has an accident which gives rise to a workers’ compensation award and a civil award, the employer or its carrier/third party administrator has a lien against the third party defendant and carrier and can often recover two thirds of what it has paid in workers’ compensation benefits where the third party award exceeds the amount of the workers’ compensation payments.

In the Weir case, Mr. Weir suffered a comminuted fracture in a car accident which arose out of work. He underwent surgery and then developed an infection which led to further surgeries. The workers’ compensation case was accepted and all benefits were paid. Mr. Weir brought a civil suit against the other driver who caused the car accident and his wife joined him in that suit. She sued for loss of the services of her husband. This is known as a per quod claim. The Weirs recovered $252,500 in the third party settlement. However, after paying his attorney and costs in the case, Mr. Weir realized that he would not have much money left when he reimbursed the workers’ compensation carrier, Liberty Mutual, for its workers’ compensation lien, which was substantial. Mr. Weir then sued his wife and Liberty Mutual asking the court to allocate the $252,500 settlement between him and his wife. Whatever amount was allocated to his wife for her claim for loss of services, he argued, should not be subject to the lien of Liberty Mutual.

The Appellate Division agreed with Mr. Weir and held that the employer’s lien does not attach to the amount of a per quod claim. The Appellate Division did criticize the method chosen by Mr. Weir to obtain this allocation, i.e. suing his wife. It pointed out that the lawyer who represented Mr. Weir in the civil suit against the other driver simply turned around and represented Mrs. Weir in the suit against her by Mr. Weir. In other words, the Appellate Division pointed out that Mr. and Mrs. Weir were not really adverse parties at all because they both wanted as much money as possible from the third party suit to be allocated to Mrs. Weir’s claim since none of that money would have to go back to Liberty Mutual.

This problem is going to vex employers, carriers, and third party administrators for a long time to come. Not having a lien on the per quod claim can mean the loss of a great deal of money to employers. For example, if the workers’ compensation benefits in a given case equal $100,000 and the third party settlement is $100,000, the employer would normally get back two thirds or $67,000 minus $200 in costs, but not if some of the $100,000 civil recovery is allocated to the spouse’s per quod claim. If the parties were to agree that the spouse’s claim was worth $40,000, then the workers’ compensation carrier would only have a lien on $60,000 ($100,000 civil recovery minus $40,000 payable to the spouse).

The Weir case does not spell out how employers are to work out this dilemma where a spouse’s claim is blended with the settlement funds which go to the worker in a civil case. How are employers, their carriers, and third party administrators to know how much of the third party settlement is to go to the spouse for a claim of loss of services? Certainly, employers cannot leave that to the plaintiff’s lawyer to decide. If that were the case, an inordinate percentage of the settlement will be allocated to the spouse’s claim simply to avoid paying back the lien. The Weir court does say the following: “We are confident that the vast majority of such matters will continue to be handled in the same manner as they are now — by mutually agreeable resolution.” Id at 448. In other words, the Appellate Division is recommending that the parties work out a fair allocation to the spouse and the injured worker. The court went on to say that it would be a rare case which would require a civil judge to conduct a hearing on how much money should be allocated to the spouse.

Clients should follow these steps: obtain as much information as possible about the alleged per quod claim by way of discovery. The file of the attorney representing the spouse in the per quod claim needs to be subpoenaed to review the alleged damages. Of course, it is also necessary to obtain the medical records of the injured worker to see the extent of the injuries. Usually the carrier has this information as part of the workers’ compensation file. Clients should not simply defer to the plaintiff’s lawyer in his or her attempt to allocate the amount of the per quod claim. There should be an active negotiation to the end of establishing a fair value of the spouse’s claim for loss of services as against the worker’s claim for injuries. It should be obvious that the per quod claim should generally be worth only a fraction of the claim of the injured worker. If all else fails, a suit can be brought for declaratory judgment with the civil judge conducting a full hearing to establish the value of the per quod claim.

by: John H. Geaney, Esq.

Petitioner’s Discovery “Fishing Expedition” Disallowed By The Appellate Division

The case of Brock v. PSE&G is well known for its holding regarding the notice provisions of the workers’ compensation statute, as reported in previous issues of this newsletter. In the case’s most recent trip to the Appellate Division, the petitioner’s broad and burdensome discovery requests were denied. Brock v. PSE&G, 325 N.J. Super. 582 (App. Div. 1999).

After the New Jersey Supreme Court held that the petitioner must comply with the notice statute N.J.S.A. 34:15-36 for occupational diseases, which requires that a petitioner supply the employer with notice of an occupational disease within five months of the date he knew or should have known “the nature of his disability and its relation to his employment,” regardless of prejudice to the employer, the case was remanded to the Division of Workers’ Compensation. The petitioner’s attorney then filed a motion for discovery of numerous documents from the employer not specifically related to this petitioner including:

-detailed information about other employees including a list of co-employees names and addresses, names and addresses of co-employees who filed asbestos claims and information regarding medical monitoring of other PSE&G employees;

-information that would establish PSE&G’s knowledge of the presence of asbestos in the plant and that exposure to asbestos was dangerous, including air sampling data, information regarding internal memoranda addressing removal of asbestos and internal documents discussing the effects of asbestos on the human body;

PSE&G had acknowledged the petitioner’s exposure to asbestos at its plant and the only issue on remand was whether the employer had notice of petitioner’s asbestosis. The workers’ compensation judge denied the petitioner’s discovery motion holding that the information that the petitioner sought could not establish notice under the workers’ compensation statute and therefore the petitioner was not entitled to it. While the requested discovery might reveal that other employees contracted asbestosis, this fact could not be used to establish that the employer had “constructive notice” that the petitioner also contracted asbestosis.

The Appellate Division upheld the workers’ compensation judge’s ruling that the discovery the petitioner sought had no bearing on the issue of notice and further noted that the employer has no obligation to inquire as to an employee’s medical condition after the employment relationship has ended.

The rules of the Division of Workers’ Compensation provide for specific circumstances where certain types of discovery will be allowed, such as standard form interrogatories for occupational disease and death cases N.J.A.C. 12:235-5.6. For discovery other than the specific items noted in the rules, there is a requirement that a motion must be filed and the requesting party must show “good cause.” This vague “good cause” standard is not often discussed in the case law. It is refreshing to see that the Division of Workers’ Compensation and the Appellate Division would not allow the burdensome and irrelevant discovery sought by the petitioner in this case. The holding in this case can be used to argue against similar types of overreaching discovery requests made by petitioners’ attorneys.

by: Claire Y. Ringel, Esq.

Capehart Scatchard NEWS

Capehart Scatchard is pleased to announce that the following attorneys have become Certified by the Supreme Court of New Jersey in the area of Workers’ Compensation: John H. Geaney, Lora V. Northen, James G. Pietras, and Claire Y. Ringel.

WINS

Jeanette Marx v. Burlington County

Occupational psychiatric stress claim dismissed by Judge Colsey after a full trial.

Handled by: Thomas J. Mannion

Client: Burlington County; Berkley Risk Managers

Petitioner alleged that she was the victim of unjustified work-place criticism by her supervisors and ultimate wrongful termination. After many days of trial and testimony from numerous factual and medical witnesses, including fellow co-employees, supervisors and petitioner’s treating psychiatrist, Judge Colsey determined that the petitioner failed to meet her burden of proof that performance criticism and ultimate termination were inappropriate based on the objective facts established at trial.

Chester Karasinski v. Burlington County

Claim petitions dismissed by Judge Colsey after a full trial on the issue of whether petitioner’s injuries were sustained in the accidents.

Handled by: Thomas J. Mannion

Client: Burlington County; Berkley Risk Managers

The petitioner, a sheriff’s officer, filed two separate claim petitions relating to a shoulder injury allegedly sustained during assisting at a motor vehicle accident scene, and later aggravated during an explosion while serving process. After a full trial which included the testimony of multiple lay and medical witnesses, Judge Colsey found that the petitioner had failed to prove any shoulder injury at the time of either incident, referring for support to evidence that the petitioner’s report concerning the motor vehicle accident had failed to refer to any shoulder injury having been sustained, and that no medical treatment had been rendered to the shoulder after the explosion. Testimony from the petitioner’s treating doctor and that doctor’s records also established evidence of a shoulder problem before the motor vehicle accident. Case is currently on appeal by the petitioner.

Frances Nusbaum v. Plainfield Board of Education

Occupational stress claim dismissed after a full trial before Judge Goldsmith.

Handled by: James G. Pietras

Client: Plainfield Board of Education; Berkley Risk Managers

The petitioner, a school teacher, claimed that she was totally and permanently disabled from chronic fatigue syndrome after having to move her class room in the grammar school four times over a three-year period. During trial, respondent was able to establish that the petitioner suffered from an underlying personality disorder, perfectionism. Respondent also established that the real source of petitioner’s stress was not the class room moves but instead her perceived conflict with the school principal over a review that she deemed to be demeaning.

After a full trial involving multiple days of testimony from the petitioner, the school principal, and experts on both sides, Judge Goldsmith dismissed the case for failure of petitioner to sustain the burden of proof pursuant to Goyden v. State Judiciary. 256 N.J. Super., 438 (App. Div. 1991), aff’d., 128 N.J. 54 (1992). The judge specifically found that the petitioner’s stress was caused by her underlying personality disorder which manifested in her perceived conflict with the school principal instead of any objectively stressful working conditions.

Mary Caldwell v. Linden Board Of Education

Reopener of an award on the hand dismissed by Judge Goldsmith after a full trial on the issue whether there was an increase in disability causally related to the original accident.

Handled by: James G. Pietras

Client: Pooled Insurance Program; Inservco

The petitioner reopened a prior award for her statutory hand. In the reopener, she claimed that she had developed carpal tunnel syndrome and that such condition was related to the accident which had occurred some four years before the conditions manifested. Rather than succumb to a Section 20 demand based on trial costs, the decision was made to fully try the case.

At trial, respondent was able to establish a minimum of four other risk factors which could have lead to the development of carpal tunnel syndrome. All four of the factors occurred after the time the original award was entered but before the condition manifested. When confronted with these risk factors on cross examination, petitioner’s expert was forced to admit that he was not sure if there was any causal relationship between the work accident and the development of the carpal tunnel syndrome.

Respondent’s expert, Dr. Arthur Canario, related the development of the carpal tunnel syndrome to the four risk factors. He also testified that it was impossible to relate the condition back to the accident given these factors. Based on this overwhelming evidence, Judge Goldsmith dismissed the case for failure to sustain the burden of proof.

Eddie Scott v. Keebler

Motion for Medical and Temporary disability benefits withdrawn by petitioner’s counsel to avoid the matter being dismissed for failure to prove a prima facie case in his Motion papers and to avoid penalties being assessed against him.

Handled by: Christopher J. Saracino and Stephanie W. Morrison

Client: Keebler; Gallagher Bassett

The petitioner filed a Motion for Medical and Temporary benefits in this denied occupational claim. The petitioner’s attorney insisted that the Motion be granted on the papers and insisted that the matter be placed on the record. Mr. Saracino, who received the Motion papers in court on the day of the Motion, argued that the petitioner’s Motion could be not granted on the papers because the petitioner failed to prove a prima facie case. There was no medical report attached to the Motion which indicated that the petitioner was in need of curative treatment causally related to his exposure at work. Mr. Saracino argued that the stenographic fees be assessed against the petitioner’s attorney since he insisted on the going on the record and clearly did not have sufficient proof to move on the papers. Judge Shteir agreed. He did not grant the Motion, but assessed the court reporting fee to the petitioner. He also ordered that the trial would start at the next listing.

The petitioner’s attorney was not ready to proceed on the date of trial. Ms. Morrison argued that the petitioner’s Motion should be denied because the papers were false, misleading and incorrect, did not prove a prima facie case and because the petitioner’s attorney was not ready to proceed with the Trial on the date ordered by the court. Ms. Morrison also argued for penalties as it was clear from the paperwork that the Motion was knowingly filed with misleading and inaccurate pleadings. Petitioner’s attorney withdrew his Motion.

Linda Hartery v. Wawa

Motion for Medical and Temporary disability benefits dismissed by Judge Hickey after direct examination and discovery.

Handled by: Stephanie W. Morrison

Client: Wawa; American International Group

The petitioner alleged she slipped and fell on a puddle of milk in an unwitnessed accident. The respondent had at least one eyewitness who could refute her testimony, and at least two other witnesses who could comment on the petitioner’s actions after the accident. Respondent’s position was that there was no accident.

After the petitioner testified on direct, she decided she did not want to return to court to testify on cross. She advised Judge Hickey by letter and through her attorney that she did not want her entire history including her medical history to become an issue in the trial. This letter was apparently in response to our requests for medical records, names of treating and family doctors and subpoenas. The judge marked the matter “not moved” but also wrote a letter to the petitioner advising her that the case would be limited to the issues at trial. We filed our Motion to Dismiss. The petitioner never responded to the judge’s letter. The matter was dismissed for lack of prosecution.

Richard Hirst v. Adelphia Cable

Claim dismissed by Judge Gumbs after a trial on the issue of whether the alleged accident was compensable.

Handled: Claire Y. Ringel

Client: GAB

The petitioner was injured in a company picnic held on a weekend. The petitioner and her supervisor testified. The picnic was a voluntary activity, although workers were encouraged to attend. The petitioner argued that the fact that he agreed to help clean up at the end of the picnic and this “benefit” to the employer should make his injury compensable. The petitioner also argued that the insured benefitted from advertising because a sign with the company name and logo appeared on the main road directing the employees to the picnic site.

Judge Gumbs agreed with the respondent’s argument that the petitioner was injured during a noncompensable recreational activity. The judge found that the allegation that the petitioner was to clean up after the picnic was not a “benefit” to the employer since the picnic was voluntarily provided by the employer and the utilization of volunteers helped free up more money in the picnic budget for food, drink, and entertainment which was a benefit to the employees.

Leslie Wilkins v. Prudential

Claim dismissed by Judge Hickey after a bifurcated trial on the issue of whether the accident was compensable.

Handled by: Claire Y. Ringel

Client: Prudential; Travelers

The petitioner, an insurance salesman, was injured when he fell in the parking lot outside the Prudential office. The building had several tenants and was not owned by the respondent. There was no assigned parking. The petitioner testified that when he fell he was still in the course of his employment because he was on his way to mail a letter to the respondent’s home office. The respondent’s witness testified that the respondent had no requirement of the same day mailing for this document and that there was an inside mail bin the petitioner could have utilized as well as mailboxes directly outside the office.

Judge Hickey agreed with the respondent’s position that the petitioner’s proposed trip to the post office did not make his injury compensable since it was not required by the respondent and the respondent did not derive any benefit from same. The injury was also found not compensable under the “parking lot” cases since the lot was not owned or controlled by the respondent and the petitioner was free to park in any area of the lot..Rita Goldberg v. Middletown Board of Education

Two claim petitions for alleged total and permanent disability dismissed by Judge Smith.

Handled by: John H. Geaney

Client: Pooled Insurance Program; Inservco

The petitioner alleged that she suffered orthopedic and internal injuries on April 3, 1989 and April 20, 1990 in traumatic falls while teaching at the Middletown Board of Education. She also filed an occupational claim petition for aggravation of her orthopedic conditions. The petitioner never returned to work following the alleged April 20, 1990 incident, and obtained disability from the State. The respondent denied that either incident had occurred and proved that the petitioner did not even work on April 3, 1989. Further, the respondent proved that the petitioner never mentioned the April 20, 1990 incident to any of the doctors who treated her in the summer of 1990 and 1991, nor did she mention it in her application for ordinary disability benefits. Moreover, the respondent proved that the petitioner did suffer a severe fall at home on November 30, 1988 when she was knocked unconscious and hospitalized. Lastly, the respondent raised serious statute of limitations issues.

Judge Smith agreed the respondent’s position and dismissed both claim petitions as well as the occupational claim. No appeal was filed.

Walter Walker v. Seaboard Express Service

Claim petition for an alleged injury dismissed for fraud.

Handled by: John H. Geaney

Client: American International Group

This case involved a motion for medical and temporary disability benefits for an alleged unwitnessed incident on October 23, 1998. The petitioner had filed several other claims in the past and the employer had questions about compensability. The petitioner certified in motion papers filed in March 1999 that he was unable to work due to severe back pain. In direct testimony on the motion in June 1999, he stated that all he did was sit at home and rest. Solid work by the defense adjuster led to tips that this man might be working. The adjuster made a “pretext” call to a construction company which turned out to be the petitioner’s current employer and found out that he had been working since January 1999. In cross examination, our office elicited further fraudulent testimony from the petitioner and then confronted him with the fact that he had been working since January 1999, and had lied to the court. The petitioner nervously admitted this but called it “light work.” A Motion to Dismiss.under the New Jersey Fraud Act of 1998 was filed. Judge Dailey dismissed the Motion for Medical and Temporary benefits as well as the entire case. No appeal was filed.

Na-koyiss Jackson v. Customized Transportation Inc.,(CTI)

Affirmance in the Appellate Division of dismissal in trial court.

Handled by: Jody L. Wiedemann

Clients: Gallagher Bassett; CTI

This case was previously listed as a win in the February, 1999 newsletter. Following a full trial, Judge Spizziri dismissed petitioner’s claim petition. Petitioner appealed. On appeal, following oral argument, the Appellate Division affirmed the dismissal of the trial court.

Patricia Villavacencio v. Family Restaurants

Motion for reconsideration dismissed with prejudice.

Handled by: Lora V. Northen Brief by: Suzanne O. Rudder

Client: Gallagher Bassett

The petitioner filed a claim for an alleged back injury from April of 1994. That claim was dismissed for lack of prosecution. The petitioner filed a Motion to Restore the claim. The Motion was filed within one year of the date of the dismissal, and therefore was timely. The petitioner failed to appear for the hearing of the Motion to Restore, and therefore, it was denied by the Order of the Court.

The petitioner then filed a second Motion to Restore the dismissed claim. The second Motion was filed more than one year after the entry of the dismissal of the claim. That Motion to Restore was denied as being out of the one-year time period.

The petitioner then filed a Motion for Reconsideration arguing that the original Motion to Restore was filed timely and there was no prejudice to the respondent if the judge allowed for restoration of the case. The petitioner also argued that he was under the impression that the original case had not been dismissed but merely discontinued.

The respondent argued that the Motion to Restore was clearly out of time, and the petitioner had not shown that this was the result of excusable neglect or any other factor. After listening to oral argument and reviewing briefs, the court found in favor of the respondent. The claim is now dismissed with prejudice.

Editors: Stephanie W. Morrison, Esq. and Claire Y. Ringel, Esq.

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