Breslin v. Liberty Mut. Ins. Co.

• Decision Date: 13 May 1975
• Parties: Michael J. BRESLIN, Jr. and Breslin & Breslin, Esqs., Plaintiffs-Respondents, v. LIBERTY MUTUAL INSURANCE COMPANY, Defendant-Appellant. John M. ARCADIPONE, Plaintiff-Respondent, v. Westwood FORD and James A. Peterson, Defendants-Respondents, and Connecticut General Life Insurance Company, Intervenor-Appellant.
• Court: New Jersey Superior Court — Appellate Division

Page 357

134 N.J.Super. 357

341 A.2d 342

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

John M. ARCADIPONE, Plaintiff-Respondent, v. Westwood FORD and James A. Peterson, Defendants-Respondents, and Connecticut General Life Insurance Company, Intervenor-Appellant.

Superior Court of New Jersey,

Appellate Division.

Argued Jan. 28, 1975.

Decided May 13, 1975.

John R. Kingsland, East Orange, for appellant Liberty Mut. Ins. Co. (Frank R. Cinquina, Newark, on the brief).

Frank R. Cinquina, Newark, for intervenor-appellant Conn. Gen. Life Ins. Co. (Schwartz & Andolino, Newark, attorneys).

Paul A. Dykstra, Hackensack, for respondents Breslin & Breslin and Michael J. Breslin, Jr. (Breslin & Breslin, attorneys, Hackensack, E. Carter Corriston, Hackensack, of counsel and on the brief).

Marc Isenberg, Paramus, for respondent Arcadipone (Philip C. Geibel, Paramus, attorney; Peter Peletz, Jr., Paramus, of counsel).

Before Judges LYNCH, ALLCORN and FURMAN.

The opinion of the court was delivered by

LUNCH, J.A.D.

The ultimate issue in these consolidated appeals is whether attorneys' fees are deductible from the lien asserted by a disability insurance carrier against a covered employee's recovery in a third-party action. As will be seen below, our resolution of that issue turns on the resolution of a conflict between New York and New Jersey law.

The trial judge, whose thoughtful opinion is reported at 125 N.J.Super. 320, 310 A.2d 527 (Law Div.1973), succinctly set forth the relevant facts and legal contentions of the parties 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). 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. (at 323--324, 310 A.2d at 529)

The trial judge held that New York law governed the existence Vel non of the subrogation rights, but that the insurers' liens were nevertheless subject, under New Jersey law, to payment of a pro rata share of the attorneys' fees and expenses incurred by the employees in the third-party actions. The insurers appeal, urging a reversal of the trial judge's holding solely with regard to attorneys' fees. Plaintiffs, apparently abandoning their contention below that no subrogation rights are cognizable, argue for an affirmance.

We reverse.

According to the New York disability statute, as interpreted by the courts of that state, the insurer is entitled to recover its full lien without deduction for attorneys' fees and expenses, provided that the employee's total third-party recovery, less attorneys' fees, exceeds the amount of disability benefits paid. McKinney's Consol.Laws, c. 67, N.Y. Workmen's Comp. Law, § 227 (1965); Cianciosi v. Merchant's Mut. Ins. Co., 61 Misc.2d 867, 307 N.Y.S.2d 136 (Sup.Ct.1970).

In contrast, as noted by the trial judge, New Jersey's temporary disability statute contains no specific provision granting subrogation rights to an insurance carrier in the present context. N.J.S.A. 43:21--25 et seq. Consequently, the issue of an attorney's lien superimposed on the insurer's lien has not arisen in any disability insurance cases in New Jersey. In closely analogous situations, however, our law subjects the subrogation rights of carriers to payment of some share of the attorneys' fees. Under the New Jersey Workmen's Compensation Act, for example, the carrier's statutory right of subrogation is subject to payment of attorneys' fees and expenses in accordance with certain statutory maxima. N.J.S.A. 34:15--40(b) and (e); Caputo v. Best Foods, 17 N.J. 259, 267, 111 A.2d 261 (1955).

And, in the absence of a statute, this court has held that where an insurer's subrogation rights arise by contract, but the contract is silent as to attorneys' fees, equitable principles dictate that the insurer pay a proportional share of attorneys' fees and expenses incurred by the insured in a successful third party action. Klacik v. Kovacs, 111 N.J.Super. 307, 268 A.2d 305 (App.Div.1970).

The conflict of laws between the two states is therefore clear: New Jersey favors contribution to the costs of suit by the insurer where such insurer has benefited from a third-party recovery; New York law precludes such deductions for attorneys' fees and costs from the liens of disability insurers.

This same conflict has arisen between the workmen's compensation laws of the two states. In Privetera v. Hillcrest Homes, Inc., 29 N.J.Super. 591, 103 A.2d 55 (Law Div.1954), plaintiff had been injured while at work in New York. He received a workmen's compensation award from the Workmen's Compensation Board of New York. It was paid by the compensation carrier in New York. A third-party action was instituted against an alleged tortfeasor in New Jersey and was settled for $3,000. The compensation carrier claimed its entire lien, while plaintiff contended the lien was subject to deduction for expenses and attorneys' fees as provided in the New Jersey Workmen's Compensation Act N.J.S.A. 34:15--40. The court rejected plaintiff's argument, saying:

Plaintiff proceeded under the provisions of article 2, section 29 of the Workmen's Compensation Law of New York, which authorized him to bring the third-party action, and he is, accordingly, bound by all of the provisions of that law--he cannot take advantage of the portion he likes and disregard those portions of which he disapproves.

My conclusion, therefore, is that the New York statute is controlling in the present case, and the New Amsterdam Casualty Company is entitled to receive the draft of $1,123.40 without deduction. The petition to impress an attorney's lien upon the fund must, necessarily, be dismissed. (at 593, 103 A.2d at 57)

Thus, even where there was a New Jersey statute providing for payment of attorneys' fees and costs, New York law to the contrary prevailed. As we have noted above, there is no such comparable New Jersey statute applicable to disability benefits as distinguished from workmen's compensation benefits.

Privetera was cited with approval in Liberty Mutual Ins. Co. v. Borsari Tank Corp., 248 F.2d 277 (2 Cir. 1957). In that case Liberty Mutual had paid compensation under Missouri law to the widows of three employees of a Missouri employer who had been killed while working on a New Jersey construction job. Third-party actions, brought in New Jersey by their estates, were settled for a total sum of $82,500. The issue arose as to whether, at the time of the settlement, Liberty was entitled to reimbursement of its full lien, or whether such recovery was subject to a reduction in the amount of a pro rata share of the attorneys' fees in the third party New Jersey actions. The court said:

Although Liberty Mutual and Borsari filed their statutory notice in the third party actions instituted in the New Jersey State Court, pursuant to New Jersey law, their right to recover on their lien, The amount of their recovery and the conditions attached thereto, are governed by the law of the State whose Compensation Act was invoked by the claimants in obtaining their compensation awards. In this case it would be the law of Missouri. (at 282; emphasis supplied)

Wilson v. Faull, 27 N.J. 105, 141 A.2d 768 (1958), involved the issue as to whether New Jersey or Pennsylvania law was applicable to the right of an injured employee of a subcontractor to maintain a common law action against a general contractor, the law of the two states differing in that regard. The court applied Pennsylvania law and said:

However, where the injured employee seeks to maintain a common law tort action against his employer in one of two or more states having a legitimate interest in the work-injury, The forum has almost invariably applied the law of the state in which the employer has provided compensation insurance and whose law granted such employer immunity from common law negligence actions by the employee, and dismissed the suit (citations omitted), * * *. This choice of law has been made by the state of the forum, whether it was the state of the injury (citations omitted), * * * or the state of the contract (citations omitted), * * * or the state of employment relation (citations omitted) * * *. (at 117--118, 141 A.2d at 775; emphasis supplied)

* * * Fundamental compensation policy dictates that where an employer is required to provide compensation benefits by the law of the state having a legitimate interest in a work-injury, under which the injured employee could...