Court Opinion

ID: 4429914
Source: CourtListenerOpinion
Date Created: 2019-08-20 19:32:29.963562+00
Date Added: 2024-06-11T14:23:17.480553
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
              APPROVAL OF THE APPELLATE DIVISION

                                   SUPERIOR COURT OF NEW JERSEY
                                   APPELLATE DIVISION
                                   DOCKET NO. A-0761-17T3

NEW JERSEY TRANSIT
CORPORATION, a/s/o DAVID
MERCOGLIANO,                            APPROVED FOR PUBLICATION

                                                 December 4, 2018
     Plaintiff-Appellant,
                                            APPELLATE DIVISION
v.

SANDRA SANCHEZ and CHAD
SMITH,

     Defendants-Respondents.
____________________________

           Argued October 30, 2018 – Decided December 4, 2018

           Before Judges Hoffman, Geiger and Firko.

           On appeal from Superior Court of New Jersey, Law
           Division, Bergen County, Docket No. L-8504-16.

           Shawn C. Huber argued the cause for appellant
           (Brown & Connery, LLP, attorneys; Shawn C. Huber,
           of counsel and on the briefs; Benjamin S. Teris, on the
           brief).

           John V. Mallon argued the cause for respondents
           (Chasan Lamparello Mallon & Cappuzzo, PC,
           attorneys; John V. Mallon, of counsel and on the brief;
           Ryan J. Gaffney, on the brief).

     The opinion of the court was delivered by
GEIGER, J.A.D.

      In this appeal, we consider whether a workers' compensation carrier can

obtain reimbursement of medical expenses and wage loss benefits it paid from

tortfeasors who negligently caused injuries to an employee in a work-related

motor vehicle accident, if the employee would be barred from recovering non-

economic damages from the tortfeasors because he did not suffer a permanent

injury.   Because we hold the workers' compensation carrier can obtain

reimbursement from the tortfeasors in this subrogation action, we reverse.

      Plaintiff New Jersey Transit Corporation (NJ Transit) appeals from the

grant of summary judgment dismissing its subrogation action against

defendants Sandra Sanchez and Chad Smith for reimbursement of the workers’

compensation benefits paid to employee, David Mercogliano, for wage loss

and medical expenses resulting from a work-related automobile accident. NJ

Transit alleges defendants negligently caused the accident and are thereby

liable for reimbursement of the workers' compensation benefits pursuant to

N.J.S.A. 34:15-40(f) (Section 40) of the Workers' Compensation Act (WCA),

N.J.S.A. 34:15-1 to -146. Defendants claim NJ Transit's claims are barred by

the limitation on lawsuit option (the verbal threshold), N.J.S.A. 39:6A-8(a), of

the Automobile Insurance Cost Reduction Act (AICRA), N.J.S.A. 39:6A-1 to -

35.

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      The motion judge, relying primarily on Continental Insurance Co. v.

McClelland, 288 N.J. Super. 185 (App. Div. 1996), held the verbal threshold

barred NJ Transit's claims. 1   We hold that in subrogation actions against

tortfeasors, the reimbursement rights of workers' compensation carriers are

governed by the WCA, not AICRA. Therefore, the workers' compensation

carrier is entitled to reimbursement from the negligent tortfeasors, even though

the injured employee could not recover the medical expenses and wage loss

from his own automobile insurer or noneconomic damages from the

tortfeasors. Accordingly, we reverse and remand for entry of partial summary

judgment in favor of NJ Transit.

                                       I.

      The facts relating to the cross-motions are not in dispute. On December

2, 2014, Mercogliano was involved in a motor vehicle collision during the

course of his employment. The vehicle driven by Mercogliano was owned by

NJ Transit. Sanchez was the driver and Smith was the owner of the other

vehicle involved in the accident.

      At the time of the collision, Mercogliano, Sanchez, and Smith

maintained personal automobile insurance policies compliant with AICRA.

1
  Continental was decided under the Automobile Reparation Reform Act (the
No Fault Act), the precursor to AICRA.

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Mercogliano's policy provided $250,000 in Personal Injury Protection (PIP)

benefits and the verbal threshold applied. The parties stipulate Mercogliano's

injuries do not vault the verbal threshold because he did not sustain a

permanent injury as defined by N.J.S.A. 39:6A-8(a).2

      As a direct result of Mercogliano's injuries and lost wages, NJ Transit's

workers' compensation carrier paid him $33,625.70 in workers' compensation

benefits, comprised of $6694.04 in medical benefits, $3982.40 in temporary

indemnity benefits, and $22,949.26 in permanent indemnity benefits.

Mercogliano did not sue defendants directly. Instead, NJ Transit has initiated

this subrogation action pursuant to Section 40, which gives workers'

compensation carriers the right to institute proceedings against third -party

tortfeasors for recovery of damages paid to injured employees.

      NJ Transit and defendants filed cross-motions for summary judgment on

stipulated facts.   The motion judge, relying primarily on Continental and

language in Lefkin v. Venturini, 229 N.J. Super. 1 (App. Div. 1988), held

AICRA trumped the WCA, ruling that N.J.S.A. 39:6A-8(a) barred NJ Transit's

claims because NJ Transit, as subrogee, stands in the shoes of the injured

2
  "An injury shall be considered permanent when the body part or organ, or
both, has not healed to function normally and will not heal to function
normally with further medical treatment." N.J.S.A. 39:6A-8(a). Permanency
must be proven "within a reasonable degree of medical probability" by
"objective clinical evidence, which may include medical testing." Ibid.

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employee, and has no rights superior to the injured employee under AICRA.

Mercogliano was fully compensated by the workers' compensation carrier for

his medical expenses and wage loss; he suffered no uncompensated economic

loss. The motion judge held NJ Transit's claim must be dismissed because

AICRA bars claims for compensated economic damages.             In reaching that

conclusion, the judge quoted the following language from Lefkin:

            N.J.S.A. 39:6A-6 places the primary obligation for the
            payment of benefits covered both by workers
            compensation and PIP on the employer rather than the
            PIP carrier. This policy decision may be presumed to
            have been based on the legislative perception that in
            terms of societal distribution of the burden of loss
            resulting from automobile-accident injury, the primary
            cost of work-related injuries should continue to be
            borne by the ultimate consumers of the goods and
            services in whose production they are incurred. Thus,
            the automobile-owning public, whose insurance rates
            are proportionally related to the PIP claims experience
            of the insurance industry, is relieved of that portion of
            the overall burden.

            [229 N.J. Super. at 12.]

      The judge then noted "[d]efendant's liability is not affected by the

fortuitous circumstance that plaintiff was entitled to workers' compensation

benefits. The compensation carrier's rights rise no higher than the employee 's

rights to which it is subrogated." Continental, 288 N.J. Super. at 190.

      The judge also attempted to reconcile the holdings in Lambert v.

Travelers Indemnity Co. of America, 447 N.J. Super. 61 (App. Div. 2016) and

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Continental. He distinguished Lambert, determining those plaintiffs were not

subject to the verbal threshold or presumptively vaulted it; thus, "each of the

three plaintiffs could prove a viable cause of action against the tortfeasor."

Each of the three plaintiffs in Lambert reached settlements with the tortfeasors.

Therefore, the judge deemed it "appropriate that the lien on economic damages

paid by the workers' compensation carrier [was] satisfied" by the plaintiffs'

respective recoveries.

      Finally, the judge concluded the workers' compensation carrier does not

have an independent right to subrogate against a tortfeasor when the injured

employee is unable to establish a cause of action against the tortfeasor.

Regarding the interplay of the WCA and AICRA as to final responsibility for

medical expenses incurred by workers who are injured in work-related motor

vehicle accidents, the judge reasoned:

                  It is the public policy of the state to have injured
            persons secure prompt medical attention with
            assurances the bills will be paid if they are in the
            course of their employment or if they are involved in
            an automobile accident. If the injured person's no-
            fault carrier pays PIP benefits, it can seek
            reimbursement from the injured person's workers'
            compensation carrier once it is established the injured
            person was in the course of his or her employment
            when the accident occurred. If plaintiff's view here
            were accepted, the workers' compensation carrier
            would pay the PIP carrier, and then seek
            reimbursement from the tortfeasor who is insured
            under an AICRA policy. The Legislature specifically

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            sought to eliminate the expensive and complicated
            claims process by creating the "no-fault" automobile
            insurance statute in the first place. Said public policy,
            a significant underpinning to the automobile no-fault
            scheme, would be thwarted if the automobile PIP
            carriers secure reimbursement from the injured
            person's workers' compensation carrier, and then that
            workers' compensation carrier subrogates the
            economic loss against a motor vehicle tortfeasor who
            is part of the no-fault insurance system. Such a result
            would be contrary to a goal of AICRA, i.e. to reduce
            the cost of automobile insurance by reducing the
            number of litigated claims.

            [(Citations omitted).]

The judge granted summary judgment to defendants and dismissed the

complaint with prejudice. This appeal followed.

      NJ Transit argues its right for reimbursement of paid workers’

compensation benefits is governed by the WCA, not AICRA, and the verbal

threshold does not bar its claims for economic loss.

                                       II.

      We review the grant or denial of a motion for summary judgment de

novo under the same standard as the trial court. Mem'l Props., LLC v. Zurich

Am. Ins. Co., 210 N.J. 512, 524 (2012). "Summary judgment must be granted

if 'the pleadings, depositions, answers to interrogatories and admissions on

file, together with the affidavits, if any, show that there is no genuine issue as

to any material fact challenged and that the moving party is entitled to a

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judgment or order as a matter of law.'" Town of Kearny v. Brandt, 214 N.J.

76, 91 (2013) (quoting R. 4:46-2(c)). Here, no issue of material fact exists and

only a question of law remains. Therefore, we afford no special deference to

the legal determinations of the trial court, and review the trial court's legal

determinations de novo. Templo Fuente De Vida Corp. v. Nat'l Union Fire

Ins. Co., 224 N.J. 189, 199 (2016).

                                      III.

      "Workers' compensation benefits must be paid for personal injuries

caused by an 'accident arising out of and in the course of employment.'" N.J.

Mfrs. Ins. Co. v. Pub. Serv. Elec. & Gas, 234 N.J. Super. 116, 118 (App. Div.

1989) (quoting N.J.S.A. 34:15-7). See also Univ. of Mass. Mem'l Med. Ctr.,

Inc. v. Christodoulou, 180 N.J. 334, 346 (2004) ("With certain limited

exceptions, the [WCA] is the exclusive remedy for an employee who suffers a

work-related injury."). As long as the employee's injuries were caused by a

third-party and not the employer, the WCA gives the workers' compensation

carrier an absolute right to seek reimbursement from the tortfeasor for the

benefits it has paid to the injured employee. Lambert, 447 N.J. Super. at 67.

Under Section 40, "the workers' compensation carrier is entitled to

reimbursement whether or not the employee is fully compensated." Utica Mut.

Ins. Co. v. Maran & Maran, 142 N.J. 609, 613 (1995).

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      AICRA's collateral source rule, N.J.S.A. 39:6A-6, "places the primary

obligation to pay benefits covered by both workers' compensation and PIP on

the employer rather than the PIP insurer." Portnoff v. N.J. Mfrs. Ins. Co., 392

N.J. Super. 377, 383 (App. Div. 2007) (citing Lefkin, 229 N.J. Super. at 12).

Therefore, "workers' compensation benefits are the primary source of recovery

for injuries suffered by employees in a work-related automobile accident, and

PIP insurers are relieved from the obligation to pay medical expenses under

N.J.S.A. 39:6A-6." Lambert, 447 N.J. Super. at 71.

      This matter does not involve the respective responsibility of the workers'

compensation carrier and the injured employee's PIP insurer. Instead, the issue

is whether the workers' compensation carrier may obtain reimbursement from

the tortfeasor for the benefits paid to the injured employee for his economic

damages. If so, the tortfeasors' automobile liability coverage would indemnify

the tortfeasors, not their PIP coverage.

      First, we discuss the case relied upon by the motion judge.               In

Continental, the plaintiff workers' compensation carrier brought a subrogation

action against the defendant, Blanche McClelland, to recover workers'

compensation benefits it paid to injured employee Scott McLaughlin as a result

of injuries he sustained in a work-related automobile accident caused by the

defendant's negligence.     288 N.J. Super. at 187.      The trial court held

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McLaughlin's election of the verbal threshold in his own insurance policy did

not deprive the workers' compensation carrier of its right to recover the

amounts it had paid to him.      The defendant appealed the partial summary

judgment ruling that struck her verbal threshold defenses.

       On appeal, the workers' compensation carrier argued the trial court

properly found its right to reimbursement under Section 40 was unaffected by

the collateral source rule, N.J.S.A. 39:6A-6, the evidence bar of N.J.S.A.

39:6A-12, or the verbal threshold statute, N.J.S.A. 39:6A-8, when workers'

compensation payments are made as a result of an automobile accident. Id. at

188.     The Continental court concluded the sole issue was whether

McLaughlin's election of the verbal threshold barred the employer's claim for

reimbursement pursuant to Section 40. Ibid.

       The panel recognized Section 40 "reserves to the injured employee a

cause of action against the third party and creates a right of reimbursement in

the employer or its insurance carrier." Id. at 189 (citations omitted). Thus it is

"immaterial to an action against a defendant tortfeasor" whether an injured

employee who is subject to the verbal threshold by his own insurance policy is

able to recover workers' compensation benefits. Id. at 189-90. However, the

panel then reasoned:

            Defendant's liability is not affected by the fortuitous
            circumstance that plaintiff was entitled to workers'

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           compensation benefits. The compensation carrier's
           rights rise no higher than the employee's rights to
           which it is subrogated. Plaintiff was clearly entitled to
           receive PIP benefits for his economic loss. Whether
           he received them is immaterial.

                 Although N.J.S.A. 34:15-40 authorizes an
           employer to institute the action against the tortfeasor
           if the injured person does not do so, the third party
           shall be liable only to the same extent as he would
           have been liable had the employee himself instituted
           suit within a year of the accident. Thus, since
           McLaughlin was subject to the verbal threshold, his
           workers' compensation carrier is subject to that
           defense in an action seeking recovery from defendant.

           [Id. at 190 (citations omitted).]

The Continental panel relied on the fact the employee "could not have

recovered any medical payments from defendant" under the No Fault Act to

bar the workers' compensation carrier from recovering those monies from

defendant. Id. at 189-90. The panel further reasoned:

                 In the trial court, plaintiff argued that its loss
           was entirely economic and therefore outside the scope
           of N.J.S.A. 39:6A-8(a), which bars recovery for
           noneconomic loss unless its criteria are met. There is
           merit to plaintiff's claim because N.J.S.A. 39:6A-12
           specifically states that the New Jersey Automobile
           Reparation Reform Act, N.J.S.A. 39:6A-1 to -35, does
           not limit "the right of recovery, against the tortfeasor,
           of uncompensated economic loss sustained by the
           injured party." Had McLaughlin not had a work-
           related accident, he could have received medical
           payments and income continuation benefits under his
           automobile insurance policy. McLaughlin could not
           have recovered any medical payments from defendant.

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            Furthermore, PIP benefits are paid by the injured
            party's automobile insurance carrier (or workers'
            compensation carrier as in this case), not by the
            tortfeasor's insurance company.

            [Id. at 190 (citations omitted).]

The panel remanded the case to the trial court to determine whether

McLaughlin actually suffered an uncompensated income loss. Id. at 191.

      Subsequent published opinions have not adopted the reasoning of

Continental; they have followed the holding of Lefkin. See, e.g., Talmadge v.

Burn, 446 N.J. Super. 413 (App. Div. 2016).          We recognize Lefkin was

decided before AICRA was enacted. However, "nothing in AICRA changed

the statutory provisions on which Lefkin relied. Importantly, both N.J.S.A.

39:6A-12 and N.J.S.A. 39:6A-6 predated AICRA and neither of those

provisions were substantively changed by AICRA so as to require a result

different from the conclusion reached in Lefkin." Lambert, 447 N.J. Super. at

76.

      In Lefkin, the plaintiff was injured in a work-related automobile

collision and all of his medical expenses were paid by his employer's workers'

compensation carrier who then asserted a Section 40 lien against the settlement

the plaintiff received from the tortfeasors. 229 N.J. Super at 5-7. The plaintiff

then sued his automobile insurer seeking to have it pay the portion of the

Section 40 lien related to his medical expenses since it had not paid any PIP

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benefits. Id. at 7-9. The plaintiff argued his automobile insurer should be

liable for the portion of the Section 40 lien related to medical expenses

because such a recovery was barred by the No Fault Act. Id. at 6-7. Thus, the

plaintiff reasoned his settlement with the tortfeasors could not have included

remuneration for his medical expenses. Id. at 7-8. The trial court dismissed

plaintiff's claims against his PIP carrier.

      On appeal, the Lefkin panel rejected the plaintiff's argument, holding:

             there is no bar against recovery of the medical
             expenses collected or collectible in workers'
             compensation from the tortfeasor. This is so because
             PIP benefits are not available to an insured if workers'
             compensation benefits are also available to him.
             Consequently, PIP benefits in that situation are neither
             collectible nor paid. Hence, . . . there is no other
             impediment      to    the   plaintiff-insured-employee
             recovering his medical expenses from the tortfeasor
             even though that recovery will ultimately be subject to
             the compensation lien.

             [Id. at 9.]

      There are three potential sources of reimbursement of medical expenses

and wage loss incurred by an employee injured in a work-related motor vehicle

accident: "workers' compensation benefits, PIP benefits, and recovery from the

tortfeasor." Id. at 8. Here, Mercogliano recovered those losses solely through

workers' compensation benefits. He did not seek or obtain recovery from his

PIP insurer or the tortfeasor.

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         "Where only workers' compensation benefits and PIP benefits are

available, the primary burden is placed on workers' compensation[,]" pursuant

to the collateral source rule of N.J.S.A. 39:6A-6. Id. at 9. "[W]hen only PIP

benefits and tortfeasor liability are involved, the primary burden is placed . . .

on the PIP carrier by N.J.S.A. 39:6A-12."         Ibid.   However, "where both

workers' compensation benefits and the proceeds of a tort action have been

recovered, the tort recovery is primary" pursuant to Section 40. Id. at 8-9. In

turn, we hold where workers' compensation benefits have been paid, but the

injured employee has not sought or obtained recovery from the tortfeasor, the

primary burden is placed on the tortfeasor.

         This court reached a similar conclusion in Lambert, where we

considered three consolidated appeals, which all presented similar material

facts.    Each plaintiff was injured in a work-related automobile accident.

Lambert, 447 N.J. Super. at 67. Each plaintiff's insurance policy provided PIP

coverage.     Ibid.   Each plaintiff received medical expense and indemnity

benefits from his or her employer's workers' compensation carrier. Ibid. Each

plaintiff settled their claims against the third-party tortfeasor in an amount that

exceeded the amount of benefits he or she had received from the workers'

compensation carrier. Id. at 67-68. The workers' compensation carriers then

asserted Section 40 liens against each of the plaintiff's third-party recoveries.

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Id. at 68-70. Each plaintiff then moved to reduce the Section 40 liens to

exclude medical benefits, arguing reimbursement of the medical expenses was

precluded because PIP medical expense benefits would not have been

recoverable from the tortfeasors under AICRA. Id. at 67-70.

      The motion judge ruled the workers' compensation carriers were not

entitled to recover the medical expenses because the injured workers were not

entitled to recover such expenses from the tortfeasors under N.J.S.A. 39:6A -

12. Id. at 67. The judge reasoned that the injured workers were limited by the

no-fault system established by AICRA; the workers' compensation carrier

"effectively stepped into the shoes" of the automobile insurer, and "the normal

recovery provisions of the [WCA] did not apply." Id. at 67.

      The Lambert panel rejected that interpretation of the interplay between

AICRA and the WCA, holding:

            that when a worker is injured in the course of his or
            her employment in a motor vehicle accident and
            workers' compensation coverage is available, the right
            of the injured worker to pursue claims against the
            third-party tortfeasor and the right of the workers'
            compensation insurer to be reimbursed are governed
            by the WCA and not AICRA. Accordingly, the
            injured worker may recover medical expenses from
            the third-party tortfeasor and N.J.S.A. 39:6A-12 does
            not apply. The workers' compensation insurer, in turn,
            has a right to be reimbursed for the appropriate
            portion of the medical expenses it has already paid
            under N.J.S.A. 34:15-40 (Section 40).

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            [Ibid.]

      The Lambert panel found it significant that nothing in AICRA's statutory

language or legislative history

            suggests the Legislature meant to treat workers, who
            are injured in a work-related automobile accident, as if
            they were limited by AICRA's no-fault system. Nor is
            there any suggestion that the Legislature intended to
            treat workers' compensation insurers as if they were
            PIP insurers. Indeed, there is simply no discussion of
            such an incorporation. It is fair to assume that had the
            Legislature intended to effectuate such a major
            change, it would have used express language in the
            statute and discussed that incorporation in AICRA's
            legislative history.

            [Id. at 75.]

      We concur with this analysis. AICRA was enacted eighty-seven years

after the WCA. If the Legislature had intended to treat workers injured in

automobile accidents differently from workers injured in any other manner, it

would have unambiguously expressed such an intent. We find the same to be

true with respect to rights of workers' compensation carriers to seek recovery

pursuant to Section 40, which long pre-dated AICRA's enactment.

      We also note NJ Transit seeks to recover benefits paid to Mercogliano

for economic loss comprised of medical expenses and wage loss, not

noneconomic loss. See N.J.S.A. 39:6A-2(k). The verbal threshold does not

apply to economic loss.     Haywood v. Harris, 414 N.J. Super. 204, 211-12

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(App. Div. 2010). An "injured worker may recover medical expenses from the

third-party tortfeasor and N.J.S.A. 39:6A-12 does not apply." Lambert, 447

N.J. Super. at 67. "The compensation lien attaches to all sources of third-party

recovery . . . ." Primus v. Alfred Sanzari Enters., 372 N.J. Super. 392, 401

(App. Div. 2004). A workers' compensation carrier has an independent right to

seek reimbursement from the tortfeasor pursuant to N.J.S.A. 34:15-40(f).

      To be clear, Mercogliano's automotive insurer paid him no benefits and

incurred no costs, and the workers’ compensation carrier does not seek

reimbursement from Mercogliano's automotive insurer. On the contrary, NJ

Transit seeks reimbursement from the negligent third-party tortfeasors

pursuant to Section 40.    If successful, NJ Transit's workers' compensation

carrier would be reimbursed by the tortfeasors, subject to their right to

indemnification from their own automotive insurers. Therefore, allowing NJ

Transit to pursue reimbursement does not conflict with AICRA's collateral

source rule, N.J.S.A. 39:6A-6.

      For these reasons, we hold NJ Transit's workers’ compensation carrier is

permitted to pursue its claim for reimbursement of the worker's compensation

benefits paid to the injured employee against the third-party tortfeasors. We

reverse the summary judgment granted to defendants and remand this matter to

the trial court for entry of partial summary judgment in favor of NJ Transit.

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Reversed and remanded. We do not retain jurisdiction.

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