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What's Hot in Workers' Comp

The Appellate Division affirms its decision to include attorneys’ fees and costs in a workers’ compensation claim in a Section 40 lien.

Panckeri v. Allentown Police Dept., No. A-2015-19 (App. Div. Aug. 19, 2022)

October 1, 2022

by Kiara K. Hartwell

The Appellate Division reviewed a remanded case for reconsideration by the Supreme Court after its decision in Richter v. Oakland Bd. of Educ., 246 N.J. 507 (2021). The case involved a petitioner who was injured in a motor vehicle accident while working and filed both a workers’ compensation claim and a tort action against the driver of the vehicle that injured him. He settled his workers’ compensation case, in which his gross permanency benefit was $20,883.10, including $2,368 for attorneys’ fees and costs. He also resolved his tort action for $99,000, reduced by $5,000 for his ex-wife’s per quod claim and $30,696 in counsel fees and $1,919.82 for expenses.

The Allentown Police Department asserted a lien under N.J.S.A. 34:15-40 (Section 40). The petitioner argued the $2,368 in attorneys’ fees and costs should not be included in the lien, and the workers’ compensation judge disagreed. The Appellate Division affirmed.

Then, in Richter, the Supreme Court discussed a claimant’s recovery from an employer under the New Jersey Law Against Discrimination (LAD) and whether this was barred by the exclusivity provision of the Worker’s Compensation Act (WCA). The relevant portion of that opinion addressed the Section 40 lien and how it would operate if the claimant’s LAD claim was successful. The specific language at issue dealt with the intent of Section 40 to bar duplicate damages, but “[t]hat does not mean that her employer is entitled to be reimbursed for fees plaintiff had to pay counsel out of her compensation award.” Richter, 459 N.J. Super. at 425-26.

Following the remand, the petitioner argued this language would exclude the $2,368 from the Section 40 lien. The employer countered that Richter was not a case involving a permanency award and that applying Richter would cause inconsistencies. Although the Appellate Division acknowledged that the express language precluded fees from a Section 40 lien, it also noted not every word in a Supreme Court opinion was binding precedent. Instead, the Appellate Division found that the 2-3 and 1-3 split only applied to Richter’s potential LAD award, not the workers’ compensation award. The Appellate Division also reiterated that the legislative history of Section 40 limited “expense of suit” and “attorney’s fee” for third-party actions and that it was silent on attorneys’ fees and costs in a workers’ compensation claim.

As such, the Appellate Division again affirmed its decision, noting there was no binding precedent holding that attorneys’ fees and costs in a worker’s compensation claim should be excluded from a Section 40 lien.

 

What’s Hot in Workers’ Comp, Vol. 26, No. 10, October 2022 is prepared by Marshall Dennehey to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We would be pleased to provide such legal assistance as you require on these and other subjects when called upon. ATTORNEY ADVERTISING pursuant to New York RPC 7.1 Copyright © 2022 Marshall Dennehey, all rights reserved. No part of this publication may be reprinted without the express written permission of our firm. For reprints or inquiries, or if you wish to be removed from this mailing list, contact tamontemuro@mdwcg.com.

Firm Highlights

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29th Annual FDLA Florida Liability Claims Conference

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Thought Leadership

U.S. Supreme Court Decides Key Issue Regarding Interstate Freight Broker Liability

Freight brokers are intermediaries.  They connect shippers of goods with trucking companies that transport those goods.  Freight brokers match a load of freight with a trucking company and oversee the logistics of the transportation. For a number of years there has been a division among the Federal Circuits regarding the potential liability of freight brokers when the trucking companies that they retain for interstate loads are involved in accidents.  At the center of this division was the Federal Aviation Administration Authorization Act of 1994 (FAAAA).  Some Federal Circuit Courts have held that state law negligent hiring claims against freight brokers were preempted by the FAAAA .  Other Federal Circuits Courts have held that even if preemption applied, the “safety exception” in the FAAAA saved state law negligent hiring claims from federal preemption.  On May 14, 2026, the U.S. Supreme Court addressed the conflict in Montgomery v. Caribe Transport II, LLC, et al, No24-1238. In that case freight broker C.H. Robinson selected Caribe Transport to haul an interstate load. The commercial truck driver employed by Caribe Transport allegedly caused an accident and the plaintiff, Montgomery, was seriously injured. Montgomery brought an action against the driver, Caribe Transport and C.H. Robinson. The allegation against C.H. Robinson was that it negligently retained Caribe Transport when it knew, or should have known, that it was an unsafe company. The Seventh Circuit Court of Appeals held that Montgomery’s claims against C.H. Robinson were preempted by the FAAAA. The plaintiff appealed to the U.S. Supreme Court.  The U.S. Supreme Court’s decision focused primarily on the safety exception in the FAAAA.  That provision provides that the FAAAA preemption “…shall not restrict the safety regulatory authority of a State with respect to motor vehicles.” C.H. Robinson argued, as freight brokers historically have, that their function was not “with respect to motor vehicles” because they do not own trucks or employ drivers. They are merely intermediaries, connecting entities who need freight moved with entities who can do that job. Therefore, C.H. Robinson argued that preemption applied, not the safety exception. The U.S. Supreme Court did not accept that argument. The Court focused on the meaning of the phrase “with respect to” in the safety exception. The Court held that it means “referring to”, “concerning” or “regarding”. Therefore, writing for a unanimous Court, Justice Barrett concluded that “[r]equiring C.H. Robinson to exercise ordinary care in selecting a carrier therefore “concerns” motor vehicles—most obviously, the trucks that will transport the goods. So, Montgomery’s negligent-hiring claim falls within the FAAAA’s safety exception, which saves it from preemption.” Justice Kavanaugh, in his concurring opinion, noted the effect this ruling may have on freight brokers and their insurers throughout the country: Importantly, the Court's decision today should not be read to mean that brokers will routinely be subject to state tort liability in the wake of truck accidents. As even plaintiff's counsel stressed, brokers should be able to successfully defend against state tort suits if the brokers have acted reasonably and arranged transportation with reputable trucking companies. Tr. of Oral Arg. 27-29. In plaintiff's counsel's words, the brokers "just have to hire carriers that actually have a reasonable policy," and "the broker is not going to have a problem if it's asking the hard questions of the carrier." Id., at 42, 45. In addition, the proximate-cause requirement in typical state tort law should help protect brokers from excessive liability. Id., at 25. That said, the brokers rightly caution against naivete. In the real world, as the brokers forcefully respond, state tort law can be unpredictable, and the costs to brokers of litigation and insurance may be significant even when brokers prevail in lawsuits. Moreover, the costs of litigation and insurance, as well as the costs of brokers' conducting more substantial inquiries into trucking companies, will cascade through the economy and be paid in part by American consumers in the form of higher prices. The concerns expressed by the brokers are legitimate and weighty. The key point here is that freight brokers can no longer claim they are protected from negligent retention claims by the FAAAA (in cases involving interstate transportation). The challenge will be to determine what is considered ”reasonable efforts” used by brokers when retaining transportation companies. 

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Ray Freudiger and Michael A. Roberts (both of Cincinnati) successfully obtained summary judgment on behalf of their client in a coverage dispute arising from a May 19, 2022, motor vehicle accident. A permissive driver operated a box truck for an interstate trucking company and caused severe injuries to two tort victims. Prior to the accident, the insured had procured a commercial auto policy for the trucking company with stated limits of $1,000,000. Following the accident, the insurer initiated a declaratory judgment action asserting that only reduced bodily injury limits of $25,000/$50,000 applied and later counterclaimed, alleging it would not have insured the driver had he been properly submitted for approval under the policy. After extensive discovery, briefing, and oral argument, the court rejected the insurer’s attempt to shift responsibility for the $750,000 in coverage it was legally required to provide for permissive drivers under Ohio law, granting summary judgment in favor of the insured and preserving $750,000 in liability exposure.

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