Breslin v. Liberty Mut. Ins. Co.

• Decision Date: 02 October 1973
• Parties: Michael J. BRESLIN, Jr. and Breslin and Breslin, Esqs., Plaintiffs, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant. John M. ARCADIPONE, Plaintiff, v. Westwood FORD and James A. Peterson, Defendants. . Law Division
• Court: New Jersey Superior Court

Page 320

125 N.J.Super. 320

310 A.2d 527

Michael J. BRESLIN, Jr. and Breslin and Breslin, Esqs., Plaintiffs, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant.

John M. ARCADIPONE, Plaintiff, v. Westwood FORD and James A. Peterson, Defendants.

Superior Court of New Jersey.

Law Division.

Oct. 2, 1973.

E. Carter Corriston, Hackensack, for plaintiffs Michael J. Breslin, Jr. and Breslin & Breslin, (Breslin & Breslin, Hackensack, Attys.).

Philip C. Geibel, Paramus, for plaintiff John M. Arcadipone.

John R. Kingsland, East Orange, for defendant Liberty Mutual Ins. Co.

Frank R. Cinquina, Newark, for intervenor-respondent Connecticut General Life Ins. Co. (Schwartz & Andolino, Newark, Attys.).

GELMAN, J.S.C.

These motions in two separate cases evolve from identical fact situations and present common questions of law. In each instance a New Jersey resident, employed in New York, was injured in an automobile accident in New Jersey. Disability benefits were paid to the employees by their respective New York employers' insurance carriers. Actions were commenced in New Jersey by the employees against third parties for injuries received in the accidents and resulted in the recovery of amounts in excess of the disability benefits received by the employees from the carriers, plus attorneys' fees and costs (computed on the whole sum recovered). ¹ The carriers in these actions assert subrogation rights under New York law to the full extent of the benefits paid, without allowance for costs or attorneys' fees incurred by the employees in effecting a recovery.

On their part the employees assert that (1) the enforcement of the New York statutory subrogation claims should be denied in their entirety because the claims conflict with the statutory law and public policy of New Jersey, or (2) at the very least and for similar reasons, the amounts claimed by the carriers are subject to an offset for the Pro rata share of costs and attorneys' fees incurred in effecting the recovery against which the right of subrogation is being claimed.

The New York disability benefits law provides for full subrogation of the total amount of benefits paid to an employee in any recovery by the employee against a third party, so long as the amount recovered, after deducting attorneys' fees and expenses, exceeds the amount of benefits paid. Workmen's Compensation Law, § 227, McKinney's Consol. Laws, c. 67. As interpreted by the New York courts, the employee's attorney does not have a lien against and is not entitled to a fee for services rendered in effecting the recovery. See, E.g., Cianciosi v. Merchant's Mut. Ins. Co., 61 Misc.2d 867, 307 N.Y.S.2d 136 (Sup.Ct.1970). The New York law is the same where third-party recovery has been effected after workmen's compensation benefits have been paid. Workmen's Compensation Law, § 29; Kussack v. Ring Const. Corp., 1 A.D.2d 634, 153 N.Y.S.2d 646 (Sup.Ct.App.Div.1956), aff'd 4 N.Y.2d 1011, 177 N.Y.S.2d 522, 152 N.E.2d 540 Ct.App.1958); Privetera v. Hillcrest Homes, Inc., 29 N.J.Super. 591, 103 A.2d 55 (Law Div. 1954).

Under the comparable New Jersey statute a disability benefits carrier is not accorded any right of subrogation against a third-party recovery, see N.J.S.A. 43:21-- 25 et seq., and in the case of workmen's compensation benefits the carrier's right of subrogation is subject to payment of an attorney's fee on the amount recovered not to exceed 33 1/3% Plus expenses not to exceed $300. See N.J.S.A. 34:15--40(b), (e).

The fact that the New Jersey statutory disability benefits scheme does not create a right of subrogation with respect to claims against third parties does not compel New Jersey courts to deny the carriers' statutory rights under New York law. Viewed as a choice-of-law question, New York's disability benefits law as enunciated in § 227 must govern the existence Vel non of the right of subrogation. The place of employment here was New York and the benefits were paid to the injured employees by reason of their New York employment and pursuant to the statutory scheme of that state. While choice of law in this situation is not controlled by the application of mechanistic formulae as such, it is evident that fundamental fairness as well as the need for certainty of result commits our courts to look to the laws of the state pursuant to which the benefits were paid to determine questions affecting the essential rights of the employers, co-employees, as well as insurance carriers. See Stacy v. Greenberg, 9 N.J. 390, 88 A.2d 619; Privetera v. Hillcrest Homes, Inc., Supra; but see, Wilson v. Faull, 27 N.J. 105, 141 A.2d 768 (1958). ²

However, it does not automatically follow that the choice of New York law on the first issue compels us to choose New York law in determining the status of the asserted attorneys' liens. It bears repeating that choice of law is no longer the product of the application of ritualistic concepts such as procedural Vs. substantive law, place of contracting, place of injury, etc. See Wilson v. Faull, Supra; Heavner v. Uniroyal, Inc., 63 N.J. 130, 140--141, 305 A.2d 412 (1973). Where choice-of-law questions are presented we must scrutinize the interests and public policy of the forum state, the contacts of the parties and of the transaction with the respective jurisdictions whose laws may be at variance, and the juridical as well as the social consequences of the selection of the law to be applied. Rose v. Port of N.Y. Auth., 61 N.J. 129, 139--140, 293 A.2d 371 (1972); Pfau v. Trent Aluminum Co., 55 N.J. 511, 514--515, 263 A.2d 129 (1970). We ought, also, to discourage 'forum shopping' to obtain the advantage of more favorable statutory or decisional law in the forum state. See Ehrenzweig, 'Contracts in the Conflict of Laws,' 59 Colum.L.Rev. 973, 1021 (1959). It is, however, clear that within these guidelines, rationally applied, there is no constitutional impediment to the selection of forum law over foreign law, even where the latter creates or gives rise to the cause of action. See Carroll v. Lanza, 349 U.S. 408, 413, 75 S.Ct. 804, 99 L.Ed. 1183 (1955); Pacific Employers Ins. Co. v. Industrial Accid. Comm'n, 306 U.S. 493, 59 S.Ct. 629, 83 L.Ed. 940 (1939).

' Forum shopping' is obviously not in issue here. These actions are common, garden-variety negligence suits brought by New Jersey residents in New Jersey courts and arising out of New Jersey accidents. Likewise, the agreements for the retention of the respective attorneys to prosecute the third-party claims were concluded in this State. Thus, with respect to all issues affecting the employees' rights of action, whether we apply mechanical choice-of-law rules or the more enlightened contacts test, New Jersey law applies and determines the result.

A long line of New Jersey judicial and statutory precedent has established the priority and status of the attorney's lien in this State. See, E.g., State v. Otis Elevator Co., 12 N.J. 1, 5, 95 A.2d 715 (1953); Visconti v. M.E.M. Machinery Corp., 7 N.J.Super. 271, 274--275, 73 A.2d 74 (App.Div. 1950); Lehigh & N.E.R. Co. v. Finnerty, 61 F.2d 289 (3 Cir. 1932); N.J.S.A. 2A:13--5. It is likewise established in this State that one who derives a benefit from the services rendered by an attorney, whether the party involved retained the attorney or not, ought in good conscience and as a matter of fundamental fairness bear at least a Pro rata share of the costs of those services to the extent of the benefit derived. Klacik v. Kovacs, 111 N.J.Super. 307, 268 A.2d 305 (App.Div.1970). The rationale of that policy is set forth in Klacik as follows:

We conclude that the more equitable rule is that espoused by the majority * * *. Clearly, had Home decided to institute its own action, or intervene in the action instituted by plaintiffs against Kovacs, it would have been required to incur expenses including an attorney's fee for such action. To establish an artificial rule which would provide an insurer with the right to sit back and permit its insured to proceed with an action, expecting to share in the avails of that proceeding without the burden of any of the expense, occurs to us to be anomalous. (at 312, 268 A.2d at 308)

Of course, in Klacik the subrogation right arose as a matter of private insurance contract and not by virtue of the law of a sister state. But surely the origin of the subrogation right does not vitiate the public policy of this State as expressed in its decisional or statutory law. After all, public policy is nothing more nor less than an expression of what the state--speaking through its legislature and its courts--deems to be fundamentally fair in the complex relations within a just and ordered society.

For the purpose of this decision, then, it is accepted that New Jersey public policy favors the recognition of an attorney's lien on moneys recovered and inuring to the benefit of a subrogee. Were this the end of the inquiry it may be doubted whether that policy, however firmly embedded in our law, is sufficient to deny exact enforcement of the statutory law of a sister state. As has often been said, the mere fact that one state, albeit the forum state, views the resolution of a particular issue in a different way than its neighbor, is not necessarily reason to preclude enforcement of a foreign statute within its borders. See, E.g., Interstate Wrecking Co., Inc. v. Palisades Interstate Park Comm'n, 57 N.J. 342, 273 A.2d 10 (1971).

But there are pragmatic considerations here as well. Every attorney practicing in this field and judges know full well that the settlement of third-party actions when subrogation claims are lurking in the background are often impossible without the cooperation of the subrogee in compromising its claim, especially if the subrogee refuses to bear its Pro rata share of litigation fees and costs. It may be judicially noticed that hundreds of thousands of New Jersey residents are employed out-of-state, principally in New York, and...