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Defense Digest

Lack of Insurance Coverage Does Not Defeat Workers’ Compensation Bar for New Jersey Workers’ Compensation Intentional Injury Claim

Defense Digest, Vol. 30, No. 1, March 2024

March 1, 2024

by Robert J. Fitzgerald

Key Points:

  • The New Jersey Workers’ Compensation Act requires all employers to obtain workers’ compensation insurance coverage or be subject to both criminal and civil penalties. 
  • The New Jersey Uninsured Employer’s Fund provides injured employees both medical and disability benefits, but not permanency benefits. 
  • Claims for intentional injuries are very difficult to sustain as they require proof of that the employer’s conduct was substantially certain to result in the employee’s injuries.

In Glen and Donna Heuman, v. Wayne Heuman, et al., 2023 WL 8539709 (NJ Super. App. Div. Dec 11, 2023), the New Jersey Appellate Division addressed an intentional injury claim with a twist—lack of workers’ compensation insurance coverage. 

In December 2017, Deejon Builders LLC, a general contracting company, entered into an agreement to build a new home. Deejon retained Wayne Heuman Masonry—owned and operated by Glen Heuman’s cousin, Wayne Heuman—as a contractor to perform masonry work. Although Wayne primarily worked alone, he would occasionally hire Glen to assist with masonry jobs. Glen was paid in cash, and his employment was never “formally recorded.”

Wayne contacted Glen to work onsite on February 13 and 14, 2018. During those two days, Glen mixed mortar and grout for the foundation of the home using a mortar mixer, which Wayne modified due to a missing recoil spring. To start the mixer in its altered state, the operator had to remove the protective cover, wrap a pull cord with a handle around a pulley section of the machine, and tug, similar to a lawnmower.

Glen used the mixer without incident on February 13, 2018, and approximately 15-20 times before lunch the following day. After lunch, however, when Glen attempted to start the mixer using the modified system, the pull cord became caught in the machine’s rotating motor, and its handle struck him in the eye. Glen received emergency treatment for fractures in his right orbital lobe as well as the rupture of the globe of his right eye. He underwent two surgeries, ultimately resulting in the removal of the right eye and his permanent need for a prosthetic. 

Glen then filed both third-party negligence and intentional injury claims against Wayne. During discovery, Glen testified he had assisted Wayne at approximately five masonry jobs and most of them involved mixing mortar. He used Wayne’s modified mixer on those other occasions without incident. Glen conceded he was familiar with use of similarly modified machines from his prior experience in masonry. Additionally, Glen admitted he was not wearing safety glasses when he was operating the mixer, which was not proper protocol. 

Glen also testified Wayne indicated to him that he possessed insurance, although Glen did not request proof of insurance or inquire what specific insurance Wayne had purchased. However, Wayne testified that he was unaware of the statutory requirement to obtain workers’ compensation insurance. Specifically, Wayne explained, he “mostly worked by [himself]” and, therefore, did not understand “the sense of [him] having workman’s comp if [he was] only covering [himself].” Wayne also testified that wrapping the cord to start the machine in that manner was common practice in the industry, and he further stated he had seen this solution for similarly broken machines during his 30-year tenure in the business.

Both parties obtained contradictory expert reports disputing whether the modification of the mortar mixer and Glen’s injuries were attributable to an intentional act. Following discovery, Wayne moved for summary judgment, arguing that the actions did not give rise to an intentional injury claim. Glen opposed summary judgment, arguing that Wayne’s failure to maintain insurance coverage defeated the workers’ compensation bar. Additionally, Glen argued there was a genuine issue of fact as to whether Wayne’s modification of the mortar mixer was substantially certain to lead to Glen’s injuries. The trial court granted summary judgement to Wayne, and Glen appealed.

The Appellate Division first noted that the lack of insurance coverage does not preclude the employer from asserting the workers’ compensation bar. It specifically noted that the New Jersey Uninsured Employer’s Fund (UEF) was created to pay for the payment of awards against uninsured defaulting employers. The Appellate Division also noted there are both criminal and civil penalties for uninsured employers. In an interesting footnote, the Appellate Division noted that, whatever difficulties there were in obtaining benefits from the UEF, it can only be resolved by the legislature.

As to the intentional injury claim, the court stated Wayne’s actions did not satisfy the high bar to apply the intentional wrong exception. Specifically, the evidence did not show Wayne knew that the use of the modified mixer was substantially certain to result in injury. Wayne had not received any formal OSHA citation about the machine or any previous complaints from employees, including Glen. Further, Glen did not protest use of the modified mixer or request that it be repaired at any point. He testified to using it multiple times in the past and 15-20 times on the day of the incident. No evidence in the record demonstrated any prior injuries or “close calls” resulting from use of the mixer, or even similarly modified mixers. Finally, Wayne did not conceal the machine’s alteration from Glen or regulatory authorities.

The court also noted that Glenn failed to overcome the “high threshold” of the context prong, as there was no record evidence that the defendant’s actions were not “a simple fact of industrial life or are outside the purview of the conditions that the Legislature could have intended to immunize employers under the Workers’ Compensation bar.” The testimony of both Glen and Wayne reflected this type of modification of a mortar mixer was common practice among the industry. “At bottom, plaintiffs fail to establish defendant’s conduct qualified as an intentional wrong under the statute or the case law.”

This case illustrates once again the very high burden the petitioner has to meeting an intentional injury claim. Even in a case where the employer did not maintain the requisite workers’ compensation insurance, the court still required proof that the employer’s conduct was substantially certain to result in the employee’s injuries in order for the employee to prevail. Further, where the injury sustained is viewed as “a simple fact of industrial life,” the employee’s recovery will be limited to the benefits under the workers’ compensation scheme. 

If you have questions about your workers’ compensation insurance coverage, or whether you are protected against an unexpected intentional injury claim, contact your insurance professional immediately.

*Bob is a shareholder working in our Mount Laurel, New Jersey, office. He can be reached at (856) 414-6009 or rjfitzgerald@mdwcg.com. 


 

Defense Digest, Vol. 30, No. 1, March 2024, 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. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2024 Marshall Dennehey. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.

Firm Highlights

Thought Leadership

First DCA Reverses Excessive Jury Award Unsupported by the Evidence

In December 2019, the plaintiffs filed a claim with Universal for damages caused by a water and sewage back up through the plumbing system and existing through multiple fixtures including the washing machine drain, kitchen sink, dishwasher, bathtub and toilet. Universal investigated the claim, issued payment for resulting water damage totaling $7,000.00 in actual cash value ($12,000.00 in replacement cost value). The plaintiffs sought additional benefits for work needed to access the below-slab cast iron plumbing system due to the failure of the system from rust, deterioration, corrosion and breaks in the line. Universal denied any additional benefits for access. In 2021, the plaintiffs filed suit. During litigation, Universal sent a plumber to inspect the home and the plumber concluded the pipes were clogged but could be cleaned. The plaintiffs’ plumber testified that the plumbing system needed to be replaced due to holes and openings in the pipes. The plaintiffs introduced two estimates prepared by Triad Restoration services totaling $79,680.22 in replacement cost value and $50,219.97 in actual cash value and an executed contract with another company for repairs with the amounts of repair redacted. Since the insurance policy did not provide coverage for repair or replacement of the plumbing system, the jury only had to decide whether the plumbing system needed to be replaced, and if it did, Universal would owe for the access costs; the jury verdict form required the jury to determine both the replacement cost value and actual cash value amounts. The jury asked if it had to rely on the Triad estimates for their amounts. The trial court advised the amount awarded had to be based on the evidence presented at trial and the law given by the trial court. The jury awarded $335,000.00 in replacement cost value or $305,000.00 in actual cash value. Universal motioned for a new trial arguing the amount awarded was unsupported by the evidence and then moved for remittitur. The trial court denied both motions and this appeal followed. The court found that while a jury’s verdict should only be disturbed with caution and discretion, the trial court must give the properly challenged award close scrutiny and determine whether it bears a reasonable relation to the damaged provided, is supported by the evidence, and could have been reached in a logical manner by reasonable means §768.74(3), (5)(d)-(e), Fla. Stat. The court found the trial court did consider the statutory requirements at the hearing on Universal’s remittitur motion and was concerned about a reasonable relation to the amount of damages proved and injury suffered and whether the award was supported by the evidence, but ultimately denied the motion, reasoning that the jury had been properly instructed to fairly and adequately compensate the plaintiffs. The court noted the only evidence providing the basis for the jury verdict was Triad’s estimates and those valued the plaintiffs' claimed loss at $79,680.22 in replacement cost value and $50,219.97 in actual cash value; no valuation evidence reasonably supported the jury verdict. The plaintiffs argued that the jury was entitled to consider more than the estimates, but the court conveyed the evidence provided did not give the jury a way to reach the amounts they awarded. The court was also not swayed by the plaintiffs’ argument regarding inflation and later price increases, but the court noted that no evidence via the contract, nor testimony regarding increase in labor, material, fuel or construction costs were entered into the record.  The court concluded the jury may draw reasonable inferences from the evidence, but it may not supply a damages number by speculation. The court did not find any of the plaintiffs’ remaining argument persuasive either. The court reversed the denial of Universal’s remittitur motion and motion for new trial as to damaged and remanded the case. The court ended its opinion with advising the trial court must determine whether replacement cost value or actual cash value is the property measure of damages under the policy and order remittitur in an amount consistent with that determination and the evidence.

Thought Leadership

United State District Court for the Middle District of Florida finds Evidence of Replacement Cost Value is Admissible and Recoverable Even When Repairs Have Not Been Made

The plaintiff filed a claim for damage as a result of Hurricane Ian. It claimed damages were over $24 million, but the carrier accepted partial coverage and paid $8,307.49 for secondary components. The carrier found hurricane damage to the building, but it was below the insurance policy’s $3.6 million deductible. The plaintiff sued for breach of the insurance policy. The carrier argued in a motion for summary judgment that plaintiff could not recover replacement cost value (RCV) because the property repairs had not been effectuated. The policy provided for RCV, but only after the repairs were completed. The carrier argued that because the repairs were not completed, the plaintiff was not entitled to RCV damages. The plaintiff argued the carrier could not withhold the actual cost value (ACV) due, which was the main allegation of the lawsuit, then fault it for not making the repairs to unlock the RCV. The United States District Court for the Middle District of Florida rejected the carrier’s argument, finding that when an insurer allegedly breached the policy by withholding coverage, it could not hide behind a repair-contingent provision to block the insured from RCV damages at trial. The court found the issue to be whether the contractual language designed to preclude certain coverage until after repairs are completed barred an insured from seeking those damages at trial when repairs were not complete. The court noted the Eleventh Circuit had not resolved this issue and neither side pointed to a definitive answer from the Florida Supreme Court. The court reasoned that it must look to the Sixth District Court of Appeal (6th DCA), which is the court which would have heard this case if it was in state court. The court noted the 6th DCA recently addressed this issue in Universal Prop. & Cas. Ins. Co. v. Rodriguez, 427 So. 3d 676 (Fla. 6th DCA 2026). The Rodriguez Court found that a breach of contract action is designed to adjudicate not only whether the contract was breached, but also evaluate the damages incurred had the breach not occurred, which the Rodriguez court found to be recovery of the RCV. This court also noted basic Florida contract principles compelled the same result, as a material breach frees the nonbreaching party to suspend its own performance and can demand the full benefit of its bargain, including RCV damages. Finally, the court found the distinction between a full denial and partial denial did not compel a different result. It found the policy required the carrier to acknowledge coverage and pay ACV for all covered damages, and the failure to do that is a material breach, entitling the insured to all of the damages available under the contract, which included the RCV.

News

106 Marshall Dennehey Attorneys Recognized in the 2027 Editions of The Best Lawyers in America® and the Best Lawyers: Ones to Watch® in America

Marshall Dennehey is proud to highlight the firm’s 106 attorneys who have been recognized in the 2027 editions of The Best Lawyers in America® and the Best Lawyers: Ones to Watch® in America. Less than 6% of all practicing lawyers in the U.S. were selected by their peers for this recognition. Additionally, four of the firm’s attorneys received the Best Lawyers® 2027 “Lawyer of the Year” awards in their respective practice areas and demographic regions. Since it was first published in 1983, Best Lawyers® has become universally regarded as the definitive guide to legal excellence. Best Lawyers lists are compiled based on an exhaustive peer-review evaluation. For more information, please visit https://www.bestlawyers.com/. OUR 2027 LAWYERS OF THE YEAR Harrisburg, PA Christopher Reeser, Personal Injury Litigation - Defendants Kacey Wiedt, Workers Compensation Law - Employers Roseland, NJ Justin F. 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Thought Leadership

Appeals Court Reverses Trial Court Order Awarding Attorney’s Fees Due to Lack of Evidence to Support Fee Awarded

The Fourth District Court of Appeal reversed the trial court’s order awarding appellate fees to People’s Trust Insurance Company based upon a lack of evidence to support the attorney’s fee award in RM & Assocs. Consulting, Inc. v. People's Trust Ins. Co., 2026 Fla. App. LEXIS 4654 (Fla. 4th DCA 2026). People’s Trust was the insurer of a residential property that had sustained water damage. RM & Associates Consulting was hired by the homeowner to perform mitigation services at the property. The homeowner assigned post-loss benefits to RM and RM subsequently filed suit against People’s Trust alleging that it had not been paid the money it was owed for the mitigation services. People’s Trust defended the lawsuit on the ground that the policy required the insured to notify the insurer before authorizing repairs so People's Trust could elect to use its preferred contractor. Because the owner did not comply with that provision, People's Trust asserted its liability was limited to the amount that its preferred contractor would have charged for the work, which People's Trust contended was $2,000. People's Trust paid that amount to RM before RM filed suit. People’s Trust filed a motion for summary judgment which was granted. RM appealed the summary judgment ruling and the ruling was upheld by the Fourth District Court of Appeal. The appellate court also granted People’s Trust’s entitlement to appellate attorney’s fees, subject to the trial court’s determination of the amount of fees, based upon an offer of judgment made by People's Trust. On remand, the trial court held an evidentiary hearing to determine the amount of attorney’s fees People’s Trust was entitled to. At the hearing, People’s Trust presented testimony from it’s fee expert, supervising trial counsel and appellate counsel. People’s Trust sought recovery of $24,866.17 for work performed by appellate counsel. The request primarily consisted of work performed in preparation of the answer brief. The fee expert testified that more than ninety hours spent preparing the answer brief was reasonable given the complexity and significance of the underlying issue. The appellate court found that the fee expert’s testimony fell short of meeting the necessary standard of demonstrating that the hours expended were necessary. The appellate court found that the billing records did not serve to cure the deficient testimony, as the billing records did not contain adequate details regarding the specific tasks performed. Rather the records contained entries such as “answer brief” which the appellate court found to be insufficient. The appellate court noted that neither the fee expert or counsel addressed how the prior research and briefing in the parallel litigation informed the work in the instant matter. The appellate court noted this was significant in that a court's attorney's fees award must exclude excessive, redundant, or otherwise unnecessary hours, citing Florida Patient's Compensation Fund v. Rowe, 472 So. 2d 1145 (Fla. 1985). Based upon the record failing to support the finding of the trial court, the 4th DCA remanded the case to the trial court for a reconsideration and redetermination of reasonable appellate attorney’s fees supported by competent substantial evidence. The 4th DCA reiterated that the fee expert’s focus on the quality of the work and the importance of the work to People’s Trust did not make up for the perceived deficiencies in the position that spending over ninety hours on a single answer brief was reasonable. Whether moving for attorney’s fees or challenging the amount of fees being sought by an opposing party, practitioners should be mindful of the evidence being used to support the claims being made. Parties should pay close attention to whether the hours being sought may be impacted by prior litigation either party may have engaged in. A party must be prepared to address how prior litigation efforts did or did not impact the amount of hours being claimed in current litigation. Lastly, billing records must be sufficiently detailed so as to support any potential future fee claim.