Thought Leadership

In this per curiam decision, the Appellate Division reviews Section 40 of the workers’ compensation statute. In enforcing a statutory lien, the Appellate Division agreed with the Judge of Compensation that the petitioner’s share of costs and fees should be included as a part of the subrogation calculation.

In April 2012, the petitioner was working as a police officer for the respondent and, while assisting at a motor vehicle accident, he injured his left foot. A claim was filed with the Division of Workers’ Compensation, and an order approving settlement was entered in January 2014 for 33 1/3% permanent partial disability of the statutory foot and $1,524 was assessed to the petitioner’s attorney for fees and costs.

Due to a worsening in his foot condition, the petitioner filed an application for review or modification of formal award. In March 2017, another order approving settlement was entered, increasing the award to 40% permanent partial disability of the statutory foot, and $844 was assessed to the petitioner’s attorney for fees and costs. Based on the two awards, the total amount of attorneys’ fees and costs was $2,368.

The petitioner also filed a lawsuit in the Law Division against the driver and owner of the vehicle who injured him. These claims were settled for $99,000, reduced $5,000 for his ex-wife’s per quod claim. The settlement was reduced by $30,693.39 in attorneys’ fees and $1,919.82 in expenses.

The respondent reserved its right to assert a lien against the petitioner’s recovery from the third party case pursuant to N.J.S.A. 34:15-40 (Section 40). The lien asserted totaled $53,717.28 for:

$16,547.13 in temporary disability benefits;

$16,287.05 in medical benefits;

$16,560.01 in permanency benefits for the January 2014 settlement; and

$4,323.09 in permanency benefits for the March 2017 settlement.

When the respondent asserted the $20,883.10 amount in total permanency benefits paid, the petitioner contested that the lien should not include the $2,368 in fees and costs paid. Specifically, the petitioner argued his share of fees and costs should not be included in the lien amount as it was not “recoverable monies” per the statute, whereas the respondent disputed that statutory interpretation and noted the “longstanding practice” of having the lien contain the gross amount of the award. After hearing arguments, the Judge of Compensation issued a written decision where the sole issue was “whether the [c]ourt must deduct [petitioner’s] share of fees and costs from the subrogation calculation.”

In rejecting the petitioner’s contention, the judge first cited another Appellate Division decision, Wager v. Burlington Elevators, Inc., 116 N.J. Super. 390, 395 (App. Div. 1971), where it was noted an employee was not entitled to double recovery. Further, the judge highlighted the notion that the employer’s subrogation rights are “statutorily created and generally attaches to ‘any sum’ recovered…” Lambert v. Travelers Indem. Co. of Am., 447 N.J. Super 61, 73 (App. Div. 2016) (citing Primus v. Alfred Sanzari Enters., 372 N.J. Super. 392, 400 (App. Div. 2004)).

The judge relied on prior case law to find “benefit” under Section 40 equated to “overall recovery.” Additionally, it was noted that, while N.J.S.A. 34:15-40(e) specifically carved out an exception for the amount of fees and costs that could be deducted from a civil action, since the Act was silent for a workers’ compensation case, the judge declined to draw additional inferences from the plain language of the statute. Also, the judge mentioned that the Legislature would amend the statute if it believed a court misconstrued its intent. Finally, based on the fact that the Legislature only increased the deductible amount under Section 40 in its 2007 amendment, the judge reasoned that it concurred with the Division’s practice of including attorneys’ fees and costs. The petitioner filed a motion for reconsideration, which the judge denied.

In affirming the judge’s decision, the Appellate Division heavily relied on the reasons articulated by the Judge of Compensation. The Appellate Division only added that the petitioner’s reliance on Kuhnel v. CNA Insurance Cos., 322 N.J. Super. 568 (App. Div. 1999) was misplaced. Kuhnel did not address the petitioner’s share of fees and costs. Rather, the Appellate Division only focused on a respondent’s portion of fees and costs, noting expenses that benefit an employee should be included in a Section 40 lien. Moreover, in Kuhnel, the petitioner’s portion of fees and costs, among other things, were included in the employer’s Section 40 lien. Finally, the Appellate Division noted Kuhnel was decided eight years prior to the 2007 amendment of Section 40, in which there was no mention of a petitioner’s portion of fees and costs.

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