Court Opinion

ID: 4431133
Source: CourtListenerOpinion
Date Created: 2019-08-20 19:52:41.457147+00
Date Added: 2024-06-11T14:51:04.847896
License: Public Domain

NOT FOR PUBLICATION WITHOUT THE
                APPROVAL OF THE APPELLATE DIVISION

                                   SUPERIOR COURT OF NEW JERSEY
                                   APPELLATE DIVISION
                                   DOCKET NO. A-3915-16T2

PAOLO MARANO,

     Plaintiff-Appellant,              APPROVED FOR PUBLICATION

v.                                          June 20, 2018

                                         APPELLATE DIVISION
CLIFFORD J. SCHOB, M.D., and
COMPREHENSIVE ORTHOPEDICS, PA,

     Defendants.
________________________________

         Argued June 4, 2018 – Decided June 20, 2018

         Before Judges Sabatino, Ostrer and Firko.

         On appeal from Superior Court of New Jersey,
         Law Division, Essex County, Docket No. L-
         6604-12.

         E. Drew Britcher argued the cause for
         appellant (Britcher Leone, LLC, attorneys;
         E. Drew Britcher, of counsel and on the
         brief; Daniel F. Nicholas, on the brief).

         Christopher J. Carlson argued the cause for
         respondent   PMA   Companies    (Capehart &
         Scatchard, PA, attorneys; Christopher J.
         Carlson, of counsel and on the brief).

     The opinion of the court was delivered by

SABATINO, P.J.A.D.

     In Pool v. Morristown Memorial Hospital, 400 N.J. Super.

572, 577 (App. Div. 2008), we held that a workers' compensation

lien under N.J.S.A. 34:15-40 attached to funds that an injured
plaintiff      received    from       a   defendant      physician         in    a    medical

malpractice      case     pursuant         to    the     terms     of      a     "high/low"

agreement.       We ruled that the money paid to plaintiff as the

negotiated "low" figure in accordance with the agreement was

subject to the statutory lien, even though a jury had rendered a

"no cause" verdict in favor of the physician and absolved him of

liability.      Id. at 575-77.

     Similarly,      in    the    present        case,        despite      a    "no    cause"

decision, an injured plaintiff recovered the "low" amount under

a   high/low     agreement       he       entered      into    with     defendants          who

provided medical treatment to him after a work-related accident.

Relying upon Pool, his employer's workers' compensation carrier

seeks to enforce its lien for compensation benefits it paid to

plaintiff.       Plaintiff       argues      that      N.J.A.C.    11:1-7.3(a)(1),             a

regulation adopted by the Department of Banking and Insurance

exempting certain payments made under a high/low agreement from

physician reporting requirements, alters the analysis in Pool.

Plaintiff claims the regulation renders the compensation lien

unenforceable in this setting.

     For the reasons that follow, we reject plaintiff's novel

argument.      We concur with the trial court that the regulation

does not affect the validity and enforceability of the carrier's

Section   40    lien,     and   that       the   lien    applies      to       the   proceeds

                                             2                                        A-3915-16T2
collected by plaintiff from the medical malpractice defendants.

We also reject plaintiff's alternative request that we repudiate

our decision in Pool.            However, we remand this matter to the

trial court for the limited purpose of reconsidering a disputed

portion of the overall lien amount.

                                          I.

      The relevant facts and procedural history are essentially

undisputed.         Plaintiff     Paolo        Marano    was    a     police      officer

employed by the Union Township Police Department.                          On July 12,

2010,    he    sustained     injuries     to    his     back    in    a    work-related

incident.

      Plaintiff      sought    treatment        from    an     orthopedic        surgeon,

Clifford       J.   Schob,    M.D.,   at       Comprehensive         Orthopedics,       PA

("Comprehensive").              According         to      plaintiff's            unproven

allegations in the medical malpractice case, Dr. Schob did not

properly diagnose his condition and negligently failed to advise

him to visit the emergency room.

      Plaintiff      underwent    extensive       medical       and    rehabilitative

treatment for his injuries.                Because the injuries were work-

related, plaintiff received workers' compensation benefits from

respondent PMA Companies ("PMA"), the third-party administrator

for Union Township.          The amount of compensation benefits paid by

PMA     from    August   1,    2013     through        March    29,       2016    totaled

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$51,779.81.           That   total     included          $5,403.07,        which       are

characterized as "case management" and non-treatment charges.

      In September 2012, plaintiff filed a complaint in the Law

Division, alleging medical negligence on the part of defendants

Dr. Schob and Comprehensive.               After defendants filed an answer

denying    liability,        the    parties       entered     into        a     high/low

agreement.       In   connection     with      their     agreement,       the   parties

elected to have the medical malpractice claims resolved through

binding    arbitration.             They       agreed     that,        following       the

arbitrator's decision, plaintiff would receive from defendants

at least $250,000 (the "low") and no greater than $750,000 (the

"high").

      The parties arbitrated the medical malpractice case before

a retired judge over two days in January 2016.                           In a letter

decision, the arbitrator found no cause of action and dismissed

the   claims     against     defendants.          Pursuant        to    the     high/low

agreement, defendants (or their insurers) paid the low figure,

i.e., $250,000, in resolution of the claims.                      Out of that sum,

$88,000    was   disbursed     to    plaintiff;         $57,148.33       was    paid    to

plaintiff's      counsel      as     reimbursement          for        expenses;       and

$62,851.67 was paid to plaintiff's counsel as an attorney's fee.

In addition, by agreement of the parties, $42,000 was kept in

trust, with plaintiff's acknowledgment that the funds would not

                                           4                                    A-3915-16T2
be   disbursed       until    the    issues      regarding      PMA's      workers'

compensation lien were resolved.               According to PMA, the amount

of its lien is approximately two-thirds of $51,779.81.

      Plaintiff asserted that the workers' compensation lien had

been extinguished as a result of the "no cause" outcome of the

arbitration.         PMA     disagreed,       asserting   the       $250,000   that

defendants   paid     to   plaintiff   constituted        an   improper    "double

recovery" unless the lien was satisfied.

      In November 2016, PMA moved before the Division of Workers'

Compensation to enforce the Section 40 lien.                        Several weeks

later, plaintiff filed an order to show cause and a verified

complaint in the Law Division, seeking a declaration that the

payment made to him pursuant to the high/low agreement was not

subject to PMA's lien.          Although PMA was not a defendant named

in   the   verified    complaint,      it     became   aware    of     plaintiff's

application and filed opposition to the order to show cause.1

      In   January    2017,     a   hearing     scheduled      in    the   workers'

compensation court on PMA's motion in that forum was adjourned.

A few days later, Judge L. Grace Spencer, heard oral argument on

1
  Given the rapid sequence of events, it appears that PMA did not
file a motion to intervene in the Law Division case, but the
trial court nevertheless heard PMA's arguments.         Plaintiff
acknowledges the lack of a formal motion by PMA to intervene in
the Law Division is not an impediment to our consideration of
the substantive issues posed on this appeal and PMA's
participation in the appeal as a respondent.

                                          5                                A-3915-16T2
plaintiff's    order      to     show      cause     and     PMA's      opposition.

Defendants in the medical malpractice case, having paid their

stipulated     sum    under       the     high/low         agreement,     did    not

participate.

    On     March     6,   2017,        Judge     Spencer     denied     plaintiff's

application, issuing a detailed written statement of reasons.

The judge noted that a key purpose of the lien statute, N.J.S.A.

34:15-40(b), is to prevent double recovery by injured workers.

Citing our opinion in Pool, 400 N.J. Super. at 572, the judge

ruled that payments made pursuant to high/low agreements were to

be treated as settlements under the lien statute and were thus

subject to such liens.

    The judge specifically rejected plaintiff's argument that

the change in physician reporting requirements, as set forth in

N.J.A.C. 11:1-7.3(a)(1), eliminated the enforceability of PMA's

lien in this high/low context.                  The judge instead found that

PMA's lien must be satisfied.                  The judge also ruled that the

workers'   compensation        court    should    make     the   determination    of

which fees were associated with medical expenses and whether

they were lienable under Section 40.

    Plaintiff's present appeal followed.                   He argues that, as a

matter of law, the changes in the physician reporting regulation

require the payment that he received as the "low" figure under

                                          6                                A-3915-16T2
the high/low agreement to be exempted from PMA's lien.                                   In the

alternative,     plaintiff         respectfully           contends         that     Pool      was

wrongly    decided        and    should      be      reconsidered          by    this    panel.

Lastly, plaintiff asserts that, if we do find the lien to be

enforceable, the matter should be remanded to the Law Division

to reduce the lien amount by a disputed portion of the charges.

     PMA    counters       that        we   should      affirm       the    trial       court's

decision and reasoning, which are legally sound.                                As a separate

jurisdictional       point,       it    contends        that    the    question         of    the

enforceability       of    the    lien      should      have    been       decided      by    the

compensation court, rather than by the Law Division.                                 PMA also

disputes whether any reduction of the lien is warranted.2

                                             II.

     Generally,       under        the      workers'          compensation          statutory

scheme, when a third party is liable to an employee or his

dependents     for    an        injury      or       death,    the    employee          or    his

dependents can take action against the third party.                                  N.J.S.A.

34:15-40.    If the employee or his dependents are successful in

obtaining recovery from such a third party, then the employer

has a statutory right to a portion of that recovery.                               This right

is provided in N.J.S.A. 34:15-40, in pertinent part, as follows:

2
  At oral argument on the appeal, both counsel expressed optimism
that the reduction issue is likely to be resolved amicably.

                                                 7                                      A-3915-16T2
            If the sum recovered by the employee or his
            dependents from the third person or his
            insurance   carrier   is  equivalent   to  or
            greater than liability of the employer or
            his insurance carrier under this statute,
            the employer or his insurance carrier shall
            be released from such liability and shall be
            entitled to be reimbursed, as hereinafter
            provided, for the medical expenses incurred
            and compensation payments theretofore paid
            to the injured employee or his dependents
            less   employee's   expenses   of  suit   and
            attorney's fee as hereinafter defined.

            [N.J.S.A. 34:15-40(b) (emphasis added).]

The general intent of the statute is to prevent double recovery

and    to   preclude     an    injured     employee     from    "recovering      and

retaining workers' compensation payments, while at the same time

recovering    and      retaining     the   full   damages      resulting   from     a

third-party tort suit."            Greene v. AIG Cas. Co., 433 N.J. Super.

59, 64 (App. Div. 2013).             See also Frazier v. N.J. Mfrs. Ins.

Co., 142 N.J. 590, 597 (1995) (explaining that "[o]therwise,

tort   recovery     would     be   duplicating    the   workers'    compensation

benefits").

       A settlement obtained by an injured employee from a third

party qualifies under Section 40 as a reimbursable recovery to

the    employer   or    workers'      compensation      carrier.     See,     e.g.,

Frazier, 142 N.J. at 595-602 (finding that a settlement for

legal malpractice was subject to a lien to reimburse workers'

compensation payments).            "Section 40 [is] not to be so rigidly

                                           8                               A-3915-16T2
confined     and    [is]       to        apply       to   recoveries     that      were   the

functional equivalent of a recovery from the actual third-party

tortfeasor."       Id. at 598.

     In Pool, 400 N.J. Super. at 577,                          we held that the right of

recovery     of     a     compensation            lien      under    N.J.S.A.       34:15-40

encompassed payments paid to injured workers pursuant to the

terms of high/low agreements.                    We noted that high/low agreements

fundamentally       are    a   type        of    a     settlement,     because     they   are

offered    and     accepted         as    a     means     of    resolving    the    parties'

differences.       Ibid.       "The general language of N.J.S.A. 34:15-40

clearly evinces the Legislature's intent to broadly expand the

type of payments to which the lien will attach."                              Id. at 576.

"No matter how atypical or novel the nature of a settlement

agreement, the lien will attach to a payment received by an

injured employee that is derivative of the employee's demand,

claim or suit against a third[-]party tortfeasor."                              Ibid.     "In

short, the lien attaches regardless of the merit of the third-

party claim."       Id. at 577.

     Plaintiff contends that our analysis in Pool is negated,

or   at    least    qualified,            by     the      Department    of   Banking      and

Insurance's adoption of N.J.A.C. 11:1-7.3(a)(1).

     The related statute, N.J.S.A. 17:30D-17, prescribes that an

insurer must notify the Medical Practitioner Review Panel "of

                                                 9                                  A-3915-16T2
any     medical     malpractice        claim       settlement,    judgment      or

arbitration award . . . ."           N.J.A.C. 11:1-7.3(a), the regulation

at issue here, provides:

              (a) Any insurer or insurance association
              authorized to issue medical malpractice
              liability insurance in the State shall
              notify the Medical Practitioner Review Panel
              in writing of the following:

              1. Any medical malpractice claim settlement,
              judgment or arbitration award involving any
              practitioner licensed by the State Board of
              Medical Examiners and insured by an insurer
              or insurance association.

              i. The notification requirement set forth in
              (a)1 above shall not apply to payments made
              under agreements for minimum and maximum
              payments   irrespective   of   the   verdict
              (commonly    referred    to   as    high/low
              agreements) where there is a finding by an
              arbitrator or a verdict in a civil action of
              no liability on the part of the practitioner
              . . . .

              [N.J.A.C. 11:1-7.3(a) (emphasis added).]

      The     portion   of   the    present    regulation    excluding   certain

payments made pursuant to high/low agreements from reporting to

the Review Panel was added in 2009 after Pool was decided.                     See

41    N.J.R.    3302(a).       The    high/low      agreement    exclusion     was

proposed because "[w]here there is a finding or verdict of no

liability on the part of the practitioner, the reporting of

payments made in accordance with a 'high/low agreement' . . .

could    be    misleading,     in    that     it   would    indicate   that    the

                                        10                               A-3915-16T2
practitioner had committed malpractice when, in fact, no finding

had been made in a legal proceeding to that effect."                             41 N.J.R.

1650(a) (emphasis added).           However, claims payments are still

reported    to    the     Department,          which       monitors        the     medical

malpractice liability insurance market, because no identifying

information is included.          Ibid.

    Neither      the    rule   proposal        nor    its       adoption    in    the   New

Jersey Register mention any impact of the regulation upon the

ability    of    an    employer    or     insurer         to     enforce    a     workers'

compensation lien.        41 N.J.R. 1650(a); 41 N.J.R. 3302(a).                          In

fact, the proposal explicitly noted the amendment would "have

little or no economic impact on insurers."                          41 N.J.R. 1650(a).

Further,   typical      settlements       outside         of    a   high/low      context,

whether a defendant's liability has been admitted or not, would

continue to trigger the reporting requirements.

    Plaintiff asserts that certain public policies underlying

the adoption of the revised regulation are thwarted by allowing

payments of the "low" amount under a high/low agreement to be

subject to Section 40 liens.              Plaintiff asserts a main reason

the regulation was adopted was to incentivize doctors sued for

malpractice      and     their     insurers          to        enter   into       high/low

agreements.       Such agreements enable doctors to be free from

reporting requirements where no liability on their part is found

                                          11                                      A-3915-16T2
but the plaintiff will still receive the "low" stipulated sum to

cover    litigation     expenses    and       perhaps     a    modest   remainder.

Plaintiff    posits     that     fewer        high/low    agreements        will    be

negotiated   if   the    result    in    this    case     is    affirmed,    because

future plaintiffs will have to demand higher "low" figures to

take into account lien obligations.              In essence, plaintiff wants

a lien-free "low."       We are unpersuaded by these arguments.

    In    adopting      the    regulatory       change,       the   Department     was

manifestly concerned about not misleading the public about the

nature of a "low" payment paid on behalf of a physician under a

high/low agreement after a "no-cause" at trial or arbitration.

That concern has no relationship to a compensation carrier's

rights under Section 40 to impose a lien on the recovery.

    Moreover, even if we were to accept plaintiff's premise

that fewer high/low agreements will be negotiated if the "low"

award is deemed subject to a Section 40 lien, that premise does

not negate the strong public policies underlying Section 40,

which we recognized in Pool.             400 N.J. Super. at 576-77.                The

ability of the employer or insurer to apply a Section 40 lien on

recovery does not depend on whether the settlement involves the

alleged tortfeasor admitting liability.

    As we have already noted, and continue to stress here, the

rationale for the statutory right to a compensation lien is

                                         12                                  A-3915-16T2
centered upon the public policy preventing double recovery.                    See

e.g., Frazier, 142 N.J. at 597.                 None of the reported cases

interpreting    and     applying   the    statute      take   into   account   the

actual liability of the alleged tortfeasor.                   Therefore, whether

an alleged tortfeasor is ultimately held to be liable does not

affect the enforceability of a lien.                   Pool therefore remains

good law, unaffected by the subsequent regulation.

       We therefore affirm the trial court's ruling concerning the

enforceability of the lien, and reaffirm our opinion in Pool.

We do remand the matter to the Law Division3 to address the

limited issue concerning the disputed portion of the lien.                     See

Aetna Life & Cas. v. Estate of Engard, 218 N.J. Super. 239, 245

(Law    Div.    1986)     (finding       that    the    Superior      Court    has

jurisdiction to decide the extent of Section 40 liens).

       Affirmed in part and remanded in part.                  We do not retain

jurisdiction.

3
  Both counsel agreed at oral argument before us that we can
presume the trial court has concurrent jurisdiction to resolve
the lien calculation dispute on remand. See Estate of Kotsovska
v. Liebman, 221 N.J. 568, 587-88 (2015).

                                         13                              A-3915-16T2