Danesi v. American Mfrs. Mut. Ins. Co.

• Decision Date: 30 March 1983
• Parties: Rose DANESI and Rinaldo Danesi, Plaintiffs-Respondents, v. AMERICAN MANUFACTURERS MUTUAL INSURANCE COMPANY, a corporation, Defendant-Appellant.
• Court: New Jersey Superior Court — Appellate Division

Page 160

189 N.J.Super. 160

459 A.2d 686

Rose DANESI and Rinaldo Danesi, Plaintiffs-Respondents, v. AMERICAN MANUFACTURERS MUTUAL INSURANCE COMPANY, a corporation, Defendant-Appellant.

Superior Court of New Jersey Appellate Division.

Argued March 7, 1983.

Decided March 30, 1983.

Joseph J. Garvey, Morristown, for defendant-appellant American Mfrs. Mut. Ins. Company (Lomell, Muccifori, Adler, Ravaschiere & Amabile, Toms River, attorneys; Joseph J. Garvey, Morristown, on the brief).

Joseph L. Gijanto, Asbury Park, for plaintiffs-respondents (Shebell & Schibell, attorneys; Richard D. Schibell, Asbury Park, of counsel; Sandra De Sarno Hlatky, Asbury Park, on the brief).

Before Judges BISCHOFF, J.H. COLEMAN and GAULKIN.

The opinion of the court was delivered by

J.H. COLEMAN, J.A.D.

This appeal addresses the novel issue of whether an employer or its workers' compensation insurance carrier that has paid workers' compensation benefits pursuant to N.J.S.A. 34:15-8 et seq. is entitled to reimbursement from a recovery obtained from a third-party tortfeasor where the statutorily created lien has not been perfected pursuant to N.J.S.A. 34:15-40(d). Succinctly put, the question presented is whether the lien must be perfected before the right to reimbursement comes into existence. The lower court held that perfecting the lien is a prerequisite to the right of reimbursement from the employee. We disagree and reverse.

The facts pertinent to our decision are not disputed. On October 11, 1977 Rose Danesi (plaintiff) sustained personal injuries when she fell down some stairs while working for Michelle-Rena Fashions, Inc. On September 28, 1979 she was awarded $8,657.50 in workers' compensation benefits. On November 28, 1978 plaintiff and her husband instituted an action in the Law Division against Paul and Minnie Barrett as third-party tortfeasors for the injuries suffered by plaintiff on October 11, 1977. The same law firm represented plaintiff in both actions. Plaintiff's attorney advised defendant on June 18, 1980 that a third-party complaint had been filed and that he would keep defendant informed of developments. Plaintiff's attorney settled the third-party case for $15,000. In response to an inquiry from plaintiff's attorney on April 16, 1981, defendant advised that $5,025 was the net amount necessary to satisfy plaintiff's obligation to reimburse her employer or its workers' compensation insurance carrier, the defendant herein. Notwithstanding the settlement of the third-party case, defendant has not been reimbursed. Defendant never filed a written lien pursuant to N.J.S.A. 34:15-40 before the settlement.

Subsequent to the settlement, plaintiffs filed the within action in the Chancery Division seeking a declaratory judgment that defendant is not entitled to reimbursement because it failed to file a written notice of lien pursuant to N.J.S.A. 34:15-40. The trial court entered summary judgment in favor of plaintiffs. He concluded that the right of reimbursement is barred unless the written notice of lien is filed with the third-party tortfeasor or his carrier by registered mail before payment is made to the employee. Defendant filed a notice of appeal from the summary judgment and denial of a motion for reconsideration held on December 18, 1981. That appeal bears Docket A-1968-81T3. Defendant also filed another notice of appeal from the summary judgment and an order dated January 4, 1982 denying a second motion for reconsideration. The latest appeal bears Docket A-2207-81T3. These appeals have been consolidated.

The Workers' Compensation Act, as originally enacted in 1911 (L.1911, c. 95), made no provisions for the reimbursement of the employer or his worker's compensation insurance carrier out of the proceeds of any recovery from the third party responsible for the employee's injury or death. The third-party recovery could not be used to satisfy even the yet unpaid worker's compensation benefits previously awarded. United States Cas. Co. v. Hercules Powder Co., 4 N.J. 157, 163, 72 A.2d 190 (1950); Henry Steers, Inc. v. Turner, etc., Co., 104 N.J.L. 189, 193, 109 A. 42 (E. & A.1927). Thus prior to legislative amendments discussed hereinafter, an employee could retain both worker's compensation benefits and the proceeds recovered from a third-party action. Newark Paving Co. v. Klotz, 85 N.J.L. 432, 91 A. 91 (Sup.Ct.1914), aff'd 86 N.J.L. 690, 92 A. 1086 (E. & A.1914).

Recognizing the harshness and inequity of the act, the Legislature amended the act in 1913 (L.1913, c. 174, § 8) to provide for three changes where there is a third-party recovery for the same injuries and losses covered by the worker's compensation award. These changes (1) proportionately extinguished the employer's obligation to pay further compensation upon payment by the third-party tortfeasor, (2) created a right of reimbursement for worker's compensation paid and (3) created a lien, when perfected, to secure reimbursement to the employer.

With minor changes in 1931 (L.1931, c. 279, § 3); 1936 (L.1936, c. 162, § 1); 1951 (L.1951, c. 169, § 1) and in 1956 (L.1956, c. 141, § 6), further refining the right to reimbursement, the controlling legislative enactments became codified as N.J.S.A. 34:15-40.

The pertinent provisions of that statute provide:

Where 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. In the event that the employee or his dependents shall recover and be paid from the said third person or his insurance carrier, any sum in release or in judgment on account of his or its liability to the injured employee or his dependents, the liability of the employer under this statute thereupon shall be only such as is hereinafter in this section provided.

(a) The obligation of the employer or his insurance carrier under this statute to make compensation payments shall continue until the payment, if any, by such third person or his insurance carrier is made.

(b) 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 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.

(c) If the sum recovered by the employee or his dependents as aforesaid is less than the liability of the employer or his insurance carrier under this statute, the employer or his insurance carrier shall be liable for the difference, plus the employee's expenses of suit and attorney's fee as hereinafter defined, and shall be entitled to be reimbursed, as hereinafter provided for so much of the medical expenses incurred and compensation payments theretofore paid to the injured employee or his dependents as exceeds the amount of such difference plus such employee's expenses of suit and attorney's fee.

(d) If at any time prior to the payment by the third person or his insurance carrier to the injured employee or his dependents, the employer or his insurance carrier shall serve notice, as hereinafter provided, upon such third person or his insurance carrier that compensation has been applied for by the injured employee or his dependents it shall thereupon become the duty of such third person or his insurance carrier, before making any payment to the injured employee or his dependents, to inquire from such employer or his insurance carrier the amount of medical expenses incurred and compensation theretofore paid to the injured employee or to his dependents. Where such notice shall have been served, it shall further become the duty of such third person or his insurance carrier, before making any payment as aforesaid, to inquire from such injured employee or his dependents the amount of the expenses of suit and attorney's fee, or either of them in the action or settlement of the claim against such third person or his insurance carrier. Thereafter, out of that part of any amount about to be paid in release or in judgment by such third person or his insurance carrier on account of his or its liability to the injured employee or his dependents, the employer or his insurance carrier shall be entitled to receive from such third person or his insurance carrier so much thereof as may be due the employer or insurance carrier pursuant to subparagraph (b) or (c) of this section. Such sum shall be deducted by such third person or his insurance carrier from the sum to be paid in release or in judgment to the injured employee or his dependents and shall be paid by such third person or his insurance carrier to the employer or his insurance carrier. Service of notice, hereinbefore required to be made by the employer or his insurance carrier upon such third person or his insurance carrier, shall be by registered mail, return receipt and in cases other than an individual shall be mailed to the registered office of such other third person or his insurance carrier.

The trial judge construed the statute to require written notice of the lien to be filed before payment to the employee; otherwise, the right to reimbursement...