Kelly Greene v. Aig Casualty Company

NOT FOR PUBLICATION WITHOUT THE
APPROVAL OF THE APPELLATE DIVISION

SUPERIOR COURT OF NEW JERSEY
APPELLATE DIVISION
DOCKET NO. A-6278-11T4

APPROVED FOR PUBLICATION
KELLY GREENE,
October 16, 2013
Petitioner-Respondent,
APPELLATE DIVISION
v.

AIG CASUALTY COMPANY,

Respondent-Appellant.

__________________________________

Argued February 27, 2013 - Decided October 16, 2013

Before Judges Grall, Koblitz and Accurso.

On appeal from the Department of Labor,
Division of Workers' Compensation,
Claim Petition No. 2009-24085.

John H. Geaney argued the cause for
appellant (Capehart & Scatchard, P.A.,
attorneys; Mr. Geaney and Ian G. Zolty,
on the briefs).

John J. Jasieniecki argued the cause for
respondent (Green, Jasieniecki & Riordan,
LLC, attorneys; Mr. Jasieniecki, of counsel
and on the brief).

The opinion of the court was delivered by

ACCURSO, J.A.D.

The question presented by this appeal is whether respondent

AIG Casualty Company (AIG), which paid workers' compensation
benefits to petitioner Kelly Greene, is entitled to a lien

against her settlement with a third-party tortfeasor pursuant to

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

even though her injury was ultimately noncompensable. The

workers' compensation judge determined that Section 40 is

inapplicable to a claim deemed not to be compensable. We

disagree and reverse.

There are very few facts in the record. Petitioner was

employed by AIG as an accountant analyst. She slipped in the

lobby of the building where she worked, on a floor wet with

rain, and sustained an injury to her knee. Petitioner

immediately reported the accident to AIG. AIG did not own the

building where petitioner worked but only leased a portion of

the premises. It initially denied the claim and advised

petitioner to submit any bills to her health insurance carrier.1

Nevertheless, and for reasons unclear on the record, within days

of that letter AIG authorized treatment without prejudice

pursuant to N.J.S.A. 34:15-15 (Section 15).

Ten weeks after the accident, the subrogation agent for

AIG's workers' compensation carrier wrote to petitioner

1
The letter to petitioner was sent by Chartis. In its reply
brief, AIG advises that "NUFIC of Pittsburgh [AIG's workers'
compensation carrier], AIG and Chartis are all the same company,
which [petitioner] was aware of as an employee of AIG."

2 A-6278-11T4
asserting a lien against any financial recovery she might obtain

from any third party. Petitioner subsequently filed a claim

petition in the Division of Workers' Compensation against AIG

and a third-party tort action.2 AIG filed an answer to the claim

petition. In response to petitioner's assertion that her injury

occurred in the course of her employment, AIG answered "UI,"

meaning the matter was "under investigation." AIG continued to

pay medical and temporary disability benefits to petitioner

pursuant to Section 15.

AIG subsequently filed an amended answer denying that

petitioner's injury had occurred in the course of her employment

and a motion to dismiss petitioner's claim petition. Petitioner

opposed the motion and filed two additional motions of her own,

one to compel AIG to provide additional medical treatment,3 and a

second, months later, to bar any claim by AIG under Section 40.

In the motion made pursuant to Section 40, counsel

expressed petitioner's willingness to concede that the claim was

not compensable in exchange for a waiver of AIG's statutory

subrogation rights as against her third-party settlement.

2
The tort action was presumably against the owner of the
building. There is no information about this suit in the
record. In its brief to this court, AIG asserts without
contradiction that the suit was settled for $225,000.
3
According to the parties, this motion was later abandoned.

3 A-6278-11T4
Counsel explained that "[i]t is Petitioner's position that

either the Workers' Compensation Claim Statute applies in its

entirety or if the accident is not compensable, no credit under

N.J.S.A. 34:15-40 is due. As such, Respondent cannot pick and

choose which provisions of N.J.S.A. 34:15-1 et seq. appl[y]."

AIG opposed the motion, noting that its motion to dismiss

had not been heard and was still pending. AIG asserted that it

provided petitioner medical treatment and disability payments

without prejudice pursuant to the express terms of Section 15,

and thus was entitled to its lien pursuant to Section 40.

Specifically, AIG contended that it paid $94,841.52 in medical

benefits and $23,963.02 in indemnity for a total of $118,804.54,

and was thus owed $79,203.03, two-thirds of the benefits paid,

from petitioner's recovery of $225,000. Counsel contended that

"[n]owhere does it state in [Section 40] that it is applicable

only when there is a compensable lien." AIG claimed that

petitioner's construction of the statute would allow her a

"double recovery" not permitted under workers' compensation

laws.

After hearing argument, the workers' compensation judge

granted petitioner's motion. Characterizing the issue as

whether "AIG is entitled to reimbursement from a third party

recovery under [Section] 40 without accepting the claim as

4 A-6278-11T4
compensable," the judge wrote that AIG "wishes to escape the

obligations of a workers' compensable judgment for additional

money for permanency and that allows petitioner to reopen the

matter for further treatment or additional disability and

requires it to shoulder a greater part of the expenses of

medical examinations and attorney's fees." The judge concluded:

Section 40 is a part of the Workers'
Compensation statutes. It is applicable in
situations involving workers' compensation
claims and cannot be taken out of context to
apply generally. If the claim is determined
not to be compensable, the section is
inapplicable. If it is compensable, the
section applies. Either we try the matter
of compensability or respondent relinquishes
its lien.

Respondent asserts that the section
denies a double recovery. One could argue
that the outcome it desires would result in
something of a double recovery for it,
rather than for the injured worker.

The judge subsequently signed an order of dismissal on consent

of the parties, which included a provision that the funds

recovered in the third-party action be held in escrow for forty-

five days in anticipation of an appeal to this court.

In a supplemental letter issued pursuant to R. 2:5-1(b),

the judge noted that

[a]t the time of the accident, petitioner
was covered by both health care benefits and
workers' compensation insurance. Whether
the matter was compensable or not, she had
medical coverage and would not have had to

5 A-6278-11T4
 bear the brunt of the expenses. If there
remains an ancillary issue regarding such
coverage, that carrier should have been
joined in that action. The Division of
Workers' Compensation is a statutory court
limited to workers' compensation injuries
and does not have authority to modify a
judgment of Superior Court.

The judge further stated that once the parties agreed to dismiss

the workers' compensation claim, she was without "jurisdiction

to order anything further."4

Our review of a judge of compensation's conclusions of law

is de novo. Sentinel Ins. Co. v. Earthworks Landscape Constr.,

L.L.C., 421 N.J. Super. 480, 486 (App. Div. 2011). In

determining the meaning of a statute, as we are required to do

here, the first step is always to consider its plain language.

Oberhand v. Dir., Div. of Taxation, 193 N.J. 558, 568 (2008).

We construe that language in light of the entire statute and the

overall statutory scheme. Cnty. of Bergen Emp. Benefit Plan v.

Horizon Blue Cross Blue Shield of N.J., 412 N.J. Super. 126, 132

(App. Div. 2010). "When the language in a statute 'is clear and

4
To the extent the judge was of the view that petitioner's
concession that her claim was not compensable deprived the court
of jurisdiction to resolve the dispute over the Section 40 lien,
we disagree. See N.J. Mfrs. Ins. Co. v. Blau, 194 N.J. Super.
27, 31 (App. Div. 1984) (holding that the original exclusive
jurisdiction of the Workers' Compensation Division over all
claims for workers' compensation benefits, includes a claim by a
compensation carrier to recover benefits allegedly improperly
received).

6 A-6278-11T4
unambiguous, and susceptible to only one interpretation,' we

presume the Legislature meant what it said and that the plain

meaning governs." Ibid. (quoting Burnett v. Cnty. of Bergen,

198 N.J. 408, 421 (2009)).

Section 15 of the Workers' Compensation Act, N.J.S.A.

34:15-1 to -142 (the Act), requires that an employer "shall

furnish to the injured worker such medical, surgical and other

treatment, and hospital service as shall be necessary to cure

and relieve the worker of the effects of the injury" but that

"[t]he mere furnishing of medical treatment or the payment

thereof by the employer shall not be construed to be an

admission of liability." N.J.S.A. 34:15-15. Section 40 of the

Act addresses situations in which a third person is liable to

the employee for an injury. While permitting an injured worker

to both collect compensation benefits and pursue a third-party

tortfeasor, Section 40 requires an employee to reimburse the

employer from the proceeds of any recovery. N.J.S.A. 34:15-40;

Pool v. Morristown Mem'l Hosp., 400 N.J. Super. 572, 575-76

(App. Div. 2008). In situations, as here, in which the recovery

exceeds payments made by the employer, the statute provides:

If the sum recovered by the employee or his
dependents from the third person or his
insurance carrier is equivalent to or
greater than the liability of the employer
or his insurance carrier under this statute,
the employer or his insurance carrier shall

7 A-6278-11T4
 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. 34:15-40b.]

It has long been understood that the clear intent of

Section 40, which was not a part of the Act's original

provisions in 1911, is to prevent 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. See United States

Casualty Co. v. Hercules Powder Co., 4 N.J. 157, 163-65 (1950)

(noting the purpose of the "amendatory legislation" was to

retain for the injured employee the benefit of a potentially

greater recovery from a third-party tortfeasor than that allowed

under the Act, while at the same time obviating "the evil of the

old law" by providing for the reimbursement of the employer or

its insurance carrier out of the proceeds of any third-party

recovery).

Contrary to petitioner's argument, nothing in either

Section 15 or Section 40 conditions reimbursement of the claim

from a third-party settlement on whether the benefits the

8 A-6278-11T4
employer paid were owed in the first place.5 Section 15

expressly provides that any payments the employer makes are

without prejudice to a defense of noncompensability, and Section

40b allows the employer reimbursement from the third-party

recovery if the sum recovered by the employee is "equivalent to

or greater than the liability of the employer." N.J.S.A. 34:15-

40b.6 Here, as petitioner concedes that AIG has no liability

under the premises rule,7 the sum she recovered in settlement of

her third-party claim must be greater than AIG's liability,

5
Petitioner points to the first line of Section 40 which
provides that "[w]here a third person is liable to the employee
or his dependents for an injury or death, the existence of a
right of compensation from the employer or insurance carrier
under this statute shall not operate as a bar to the action of
the employee or his dependents, nor be regarded as establishing
a measure of damage therein," N.J.S.A. 34:15-40 (emphasis
added), as evidencing the Legislature's intent "that the
liability of a third-party is not triggered absent an employee's
right to receive benefits under N.J.S.A. 34:15-1 et seq."
Petitioner's reading would bar her from receiving payments under
the Act and from suing a third-party tortfeasor for negligence,
a nonsensical result utterly at odds with the statute's express
terms.
6
A recent amendment to N.J.S.A. 34:15-15 makes clear that AIG
could not recover directly from petitioner any fees it paid for
treatments or medical services. See L. 2012, c. 67, § 1. This
amendment, however, is not implicated here as AIG seeks
reimbursement only from petitioner's third-party recovery as
expressly allowed by Section 40.
7
See Acikgoz v. N.J. Tpk. Auth., 398 N.J. Super. 79, 88-89 (App.
Div. 2008) (explaining that under the premises rule an employee
must show that the employer had control of the property on which
the accident occurred in order to demonstrate that the accident
occurred in the course of employment).

9 A-6278-11T4
because the injury was noncompensable and AIG's liability

therefore nonexistent. Accordingly, AIG is entitled to recover

from petitioner's third-party settlement all of its payments to

her, less her expenses of suit and attorney's fee in accordance

with Section 40.

Our conclusion that Section 40 applies regardless of a

claim's compensability furthers the Act's remedial purpose of

"mak[ing] benefits readily and broadly available to injured

workers through a non-complicated process." Tlumac v. High

Bridge Stone, 187 N.J. 567, 573 (2006). Allowing third-party

reimbursement under Section 40 without regard to compensability

encourages the employer to make prompt voluntary payments,

thereby affording the employee needed funds for medical

treatment and the replacement of lost wages. The Act encourages

the same result through the express assurance of Section 15 that

the voluntary payment of benefits will not constitute an

admission of liability, as well as through N.J.S.A. 34:15-64c,

the Act's attorney fee provision, which allows an employer to

reduce its exposure to payment of the petitioner's fees by

making a timely good faith tender of compensation. Menichetti

v. Palermo Supply Co., 396 N.J. Super. 118, 123-24 (App. Div.

2007) (noting that the purpose of the Act's fee provision is to

encourage the employer to offer a settlement and start paying

10 A-6278-11T4
the employee at an early date). Other courts have similarly

permitted third-party reimbursement for voluntary payments

without a compensability determination to further the policy of

encouraging employers to make prompt payments to injured

workers. See Struhs v. Prot. Techs., Inc., 992 P.2d 164, 167-68

(Idaho 1999) (subrogation permitted pursuant to statute even

though benefits had been voluntarily paid rather than the

subject of a formal award); see also Olson v. Blesener, 633

N.W.2d 544, 546-47 (Minn. Ct. App. 2001) (employer who

voluntarily paid key employee lost wages could seek

reimbursement from third-party recovery through subrogation,

albeit not by statute, because employee was never required to be

covered by workers' compensation).

In addition, permitting AIG a lien against petitioner's

settlement with a third-party tortfeasor pursuant to Section 40,

even though her injury was ultimately noncompensable, furthers

the legislative policy of integrating the sources of recovery so

as to prevent double recoveries. Midland Ins. Co. v.

Colatrella, 102 N.J. 612, 618 (1986). Our Supreme Court has

broadly construed Section 40 by holding that "any proceeds"

whether recovered directly from the third-party tortfeasor or

from a functionally equivalent source, such as uninsured

motorist insurance or legal malpractice proceeds, are subject to

11 A-6278-11T4
Section 40 liens, and that the same "no double recovery rule"

applies to both types of recoveries, even when the employee is

not fully compensated. Frazier v. N.J. Mfrs. Ins. Co., 142 N.J.

590, 602 (1995) (explaining that Section 40 prevents "double

recovery," which "occurs when the employee keeps any workers'

compensation benefits that have been matched by recovery against

the liable third person, even if the two combined would leave

the employee less than fully compensated"). Likewise, we have

held that where multiple sources of recovery present themselves,

workers' compensation benefits, personal injury protection

benefits, and recovery from the tortfeasor, the interplay of the

controlling statutes reflects a legislative intention to assure

but a single recovery to the injured worker. Lefkin v.

Venturini, 229 N.J. Super. 1, 8-9 (App. Div. 1988).

Petitioner and the workers' compensation judge suggest that

petitioner has been penalized by AIG's payment of benefits under

Section 15, as she would otherwise have had her medical expenses

paid by her health insurer.8 But that ignores the effect of the

8
We reject petitioner's contention that AIG's voluntary payment
of benefits under the circumstances of this case implicates the
Sheffield Doctrine, Sheffield v. Schering Plough Corp., 146 N.J.
442, 460 (1996) (holding that "when an employer undertakes to
advise an injured employee to apply for certain disability or
medical benefits that are authorized by the employer, the
employer necessarily assumes a further obligation not to divert
the employee from the remedies available under the Act").
(continued)

12 A-6278-11T4
collateral source rule, N.J.S.A. 2A:15-97. Under our collateral

source rule, petitioner would have been obliged to disclose to

the court any amounts she received from her health insurer and

they would have been deducted from any tort judgment.9 Perreira

v. Rediger, 169 N.J. 399, 409 (2001). Accordingly, had

petitioner's health insurer paid her medical expenses instead of

AIG, the benefit would have accrued to the third-party

tortfeasor, not to petitioner. Id. at 410-414 (explaining that

the two-fold purpose of N.J.S.A. 2A:15-97 was to eliminate the

double recovery to plaintiffs that flowed from operation of the

common-law rule and to allocate the benefit of that change to

liability carriers, thus leaving health insurers in the same

position as they were at common law with no right of equitable

subrogation).

(continued)
Sheffield was directed at an employer's efforts to divert an
employee from availing herself of the benefits of the Act.
Here, AIG promptly made benefits available to petitioner.
Moreover, petitioner filed her claim petition through counsel
after AIG initially denied the claim, reversed course and began
to voluntarily pay benefits, and after the subrogation agent for
AIG's workers' compensation carrier wrote to petitioner
asserting a lien against any financial recovery she might obtain
from any third party. These circumstances and the lack of any
prejudice to petitioner from the ordinary operation of Section
40 render Sheffield inapplicable here.
9
That petitioner settled her claim does not change the calculus.
See Lefkin, supra, 229 N.J. Super. at 5, 8-9.

13 A-6278-11T4
 Thus, we perceive no disadvantage to petitioner in allowing

a Section 40 lien against her third-party recovery regardless of

the compensability of her claim. Because our collateral source

rule, N.J.S.A. 2A:15-97, expressly excludes workers'

compensation benefits, however, not allowing a lien in this

circumstance would undoubtedly result in a double recovery to

petitioner, a result certainly not intended by the Legislature

under Section 40 or the collateral source rule. See Frazier v.

New Jersey Mfrs. Ins., 276 N.J. Super. 84, 90 (App. Div. 1994)

(noting that because the Legislature specifically protected the

funds necessary to satisfy a Section 40 lien by excepting

workers' compensation benefits from the ambit of the collateral

source rule, if repayment of the workers' compensation carrier

from the third-party recovery were not required, the workers'

compensation exclusion would result in a double recovery to the

plaintiff in contravention of clear legislative policy against

duplication of awards), aff'd, 142 N.J. 590 (1995).

Read in conjunction, Section 40 and our collateral source

statute plainly require that a third-party tortfeasor be held to

the full extent of its liability for a workplace injury, that

the employer or compensation carrier be repaid for benefits paid

to the injured worker pursuant to the Act without regard to the

14 A-6278-11T4
compensability of the claim, and that the employee not obtain a

double recovery.

Reversed.

15 A-6278-11T4