Workers' Compensation Defense

Key Points:

• Permanency benefit awards must be paid in a timely manner.
• The penalties awarded should be consistent the lateness of the payment, the amount of permanency benefits awarded and the possible bad faith of the parties.
• The penalties awarded should be governed by permanency award factors, such as the amount of time it takes the litigation to resolve.

In Luis Ripp v. County of Hudson, 277 A.3d 1071 (N.J. Super. App. Div. 2022), the New Jersey Appellate Division addressed factors to be considered in awarding financial penalties for the late payment of permanency benefit awards. The petitioner worked for Hudson County as an assistant chief engineer/boiler operator. He sustained a work injury on February 11, 2013, and filed a claim petition. On January 26, 2021, he received an award of permanent/total disability. When the award was not paid within 60 days, the petitioner filed a Motion to Enforce.

The award was paid on April 12, 2021, 16 days after what the parties considered to be the due date. The respondent offered several excuses for the late payment, including that its third-party administrator failed to submit the payment request in time for the county commissioners meeting, that its third-party administrator was delayed due to the transfer of an adjustor and, of course, that there was delay due to the COVID-19 pandemic.

The Judge of Compensation noted in the underlying litigation that the petitioner needed to successfully make enforcement motions to obtain temporary disability benefits. The judge also noted that there were settlement discussions for a permanent/total award in August 2019, but the county did not authorize settlement until January 2021. She stated the petitioner was “without significant funding for quite a long time” and had written to the court on many, many occasions, sharing his dismay over the amount of time it was taking to resolve his claim. She said the petitioner was “anxious about money and the court was very sensitive to all of that.”

In granting the motion, the judge ordered the respondent to pay the petitioner an additional $43,370 within 60 days. The county appealed. In the subsequent written decision, the judge reiterated that the respondent agreed in early 2019 that the petitioner was totally disabled. She noted that the petitioner was receiving Social Security Disability benefits and that, because “Social Security is notoriously slow,” it delayed computation of the petitioner’s average current earnings, necessary so the order could be effectuated.

The judge also recognized that, given the size of the award, the county needed to involve its excess insurance carrier. The excess carrier’s authority to settle was not provided until December 2020.

However, the judge stated this delay “was to the dismay of [Ripp].” She cited “several letters” from the petitioner that she shared with counsel, detailing his emotional and financial distress as a result of not working. The judge cited the petitioner’s “life-altering injury,” lack of “wages for over four years,” and his “disabled child,” which left the judge very sympathetic. The judge also said the court had “bent over backwards to give the [county] the time to ‘get it’s ducks in a row,’” and it was “inconceivable” that payment was overdue. The judge found the county’s delay was “unreasonable” and concluded it was appropriate to impose the maximum additional assessment of 25% to enforce the order.

On appeal, the respondent argued the judge erred in her expansive application of Section 28.2 (Penalties and Sanctions) and, additionally, that she abused her discretion in imposing a manifestly excessive assessment under the circumstances. The court agreed and reversed the order. It first referenced Section 28.1 which provides:

If an . . . employer’s insurance carrier, . . . unreasonably or negligently delays or refuses to pay temporary disability compensation, or unreasonably or negligently delays denial of a claim, it shall be liable to the petitioner for an additional amount of 25% of the amounts then due plus any reasonable legal fees incurred by the petitioner as a result of and in relation . . .

Next, the court referenced the amendments to Section 28.2, which now provide:

If any employer . . . fails to comply with any order of a judge of compensation . . . , a judge of compensation may, in addition to any other remedies provided by law:

a.         Impose costs, simple interest on any moneys due, an additional assessment not to exceed 25% of moneys due for unreasonable payment delay, and reasonable legal fees, to enforce the order, statute or regulation;

b.         Impose additional fines and other penalties on parties or counsel in an amount not exceeding $5,000 for unreasonable delay, with the proceeds of the penalties paid into the Second Injury Fund

Additionally, the Division then adopted Rule 12:235-3.16(h)(1)(i), which allows a judge to impose an additional assessment not to exceed 25% on any moneys due if the judge finds the payment delay to be “unreasonable.” Unlike Section 28.1, which deals with delays in paying temporary disability benefits and defines a 30-day delay as presumptively unreasonable, the Legislature here chose not to specify what is a presumptively unreasonable delay in payment of settlement proceeds under an order entered under the statute.

Based on these provisions, the court reasoned that the plain and unambiguous language of Section 28.2 limits imposition of a penalty to situations justifying the court’s enforcement of its order fixing the moneys due a petitioner pursuant to that order only if there is an “unreasonable payment delay.” In this case, the order was not entered until January 26, 2021. Therefore, it was not an “unreasonable payment delay” prior to March 26, 2021.

Accordingly, it was legal error for the judge to consider, for example, the length of time it took to resolve the petition after the parties agreed the petitioner was totally disabled. No payments were due the petitioner until the order was entered, and no payments were delayed for the first 60 days after that. Further, the judge recognized that there were ample, legitimate reasons why it took until January 2021 to enter the order finally settling the matter, and that those delays were not “unreasonable.”

Having said that, however, the county did not contest that it failed to pay the petitioner the moneys due under the order in a timely fashion. Rather, it offered various excuses for the delay, which the judge considered and, to some degree, accepted as reasonable. Nevertheless, the judge imposed the maximum statutory penalty for a 16-day payment delay.

In reversing the order, the court noted there was no reported case defining the appropriate standard of appellate review of a penalty awarded pursuant to a motion seeking enforcement of an order entered under the statue. In remanding the case, the court instructed that it would be appropriate to consider the length of the delay, the size of the late payment, and the effect a sizeable payment that is delayed beyond its due date would undoubtedly have upon a petitioner and his or her family.

Notably, a judge cannot consider delays in the litigation that predated entry of the order. Further, the court insinuated that an award of the maximum penalty under the statute, even though the delay in payment was only 16 days, and the certain extenuating circumstances that reasonably delayed payment in this case, would be struck down. Additionally, the court also suggested the lack of presence of bad faith, if any, would be factor to consider. Interestingly, the court indicated that the proceedings on remand could be conducted by a different judge.

This is the first case that addresses the factors to be considered in awarding penalties and sanctions for the late payment of a permanency benefit award. It is also very timely, given that many respondents are struggling to hire and retain claims professionals in the aftermath of the COVID-19 pandemic and The Great Resignation over the past couple of years. In its decision, the court confirms the long-standing requirement that workers’ compensation awards are required to be paid on a timely basis. When that fails to happen, Section 28.2 allows for various penalties, sanctions, etc., but maximum monetary punishments should not be awarded reflexively. Accordingly, respondents should continue to strive for full compliance in the timely payment of awards, or unnecessary and possibly substantial additional financial losses could result.