Midland Ins. Co. v. Colatrella

Decision Date11 June 1986
Citation102 N.J. 612,510 A.2d 30
PartiesMIDLAND INSURANCE COMPANY, Plaintiff-Respondent, v. Anthony P. COLATRELLA, Defendant-Appellant, and Travelers Insurance Company, a Connecticut corporation, Defendant.
CourtNew Jersey Supreme Court

Ernest N. Giannone, East Orange, for appellant (Giannone & Curreri, East Orange, attorneys).

Joseph T. Duchak, Brick, for respondent (Eak & Duchak, Brick, attorneys).

The opinion of the Court was delivered by

POLLOCK, J.

This case requires us to determine whether a workers' compensation lien applies against the proceeds of an uninsured motorist provision of an injured worker's personal automobile insurance policy. The trial court ruled that the lien applied and that the worker must reimburse the compensation carrier from the proceeds of his uninsured motorist insurance. The Appellate Division agreed. 200 N.J.Super. 101, 490 A.2d 366 (1985). We granted certification, 101 N.J. 278, 501 A.2d 942 (1985), and now affirm the judgment of the Appellate Division.

I

While working for the New Jersey Highway Authority in July 1980, defendant Anthony Colatrella was struck by an unidentified hit-and-run motorist. Colatrella filed a workers' compensation claim and was paid $9270.52 by Midland Insurance Company (Midland), the workers' compensation carrier for his employer. Colatrella also filed a claim under the uninsured motorist provision of his personal automobile liability insurance policy with Travelers Insurance Company (Travelers). This claim was submitted to arbitration and during the pendency of the arbitration proceeding, Midland asserted a lien, pursuant to N.J.S.A. 34:15-40, against the award. Colatrella and Travelers settled the uninsured motorist claim for $27,500, which was $2,500 less than the $30,000 policy limit, and Travelers paid the agreed sum to Colatrella in exchange for a hold-harmless agreement.

Midland sued Colatrella and Travelers for reimbursement, and Travelers cross-claimed against Colatrella for indemnification. All parties moved for summary judgment. The Law Division granted Midland's motion requiring Colatrella to reimburse Midland, and also granted Travelers' motion seeking indemnification from Colatrella.

On Colatrella's appeal, the Appellate Division adhered to its holding in Montedoro v. City of Asbury Park, 174 N.J.Super 305, 416 A.2d 433 (1980), which held that the lien of the workers' compensation carrier attaches to the proceeds of uninsured motorist insurance purchased by the employer. The Court perceived no reason for reaching a different result merely because the uninsured motorist provision at stake in the present case was contained in the policy of the employee, not the employer. 200 N.J.Super. at 107, 490 A.2d 366. The court also found that the Legislature specifically intended N.J.S.A. 34:15-40 to prevent double recovery by an employee, id. at 104, 490 A.2d 366, and that N.J.S.A. 17:28-1.1, which requires uninsured motorist coverage, did not evince a contradictory legislative intent, id. at 106, 490 A.2d 366. Consequently, the Appellate Division held that Midland was entitled to reimbursement for its workers' compensation lien from the proceeds of Colatrella's uninsured motorist policy.

II

Generally speaking, the workers' compensation and uninsured motorist statutes apply to different risks. The Workers' Compensation Act provides prescribed benefits to an employee for work-related injuries, and the uninsured motorist statute provides a means for an automobile owner to recover for injuries caused by an uninsured motorist. Nonetheless, both statutes are implicated in the present case, which involves work-related injuries sustained by an employee caused by the negligence of an unidentified ("hit-and-run") motorist.

An injured party asserting a claim either in workers' compensation or under uninsured motorist coverage may recover lesser damages than would be allowed in a common-law action against a third-party tortfeasor. In some cases, the actual damages suffered by the employee may exceed the combined recovery under the Workers' Compensation Act and uninsured motorist coverage. Here, however, it is apparent that the workers' compensation benefits and the proceeds of Colatrella's uninsured motorist coverage exceed the acknowledged value of his injuries.

Under the workers' compensation law, when an injured employee has received compensation benefits and later recovers a greater sum from a third person liable for those injuries, the employee must reimburse the employer or its compensation carrier to the extent of the benefits paid. N.J.S.A. 34:15-40(b). The purpose of the statute is to reconcile recovery in a workers' compensation proceeding and in a common-law-tort action. New Amsterdam Cas. Co. v. Popovich, 18 N.J. 218, 225-26, 113 A.2d 666 (1955). Typically, the statute applies when the employee recovers from a third-party tortfeasor. See, e.g., Schweizer v. Elox Div. of Colt Indus., 70 N.J. 280, 359 A.2d 857 (1976). In the present case, however, the employee recovered not from the tortfeasor, who was the unidentified hit-and-run driver, but from his own uninsured motorist carrier. Colatrella seizes upon this difference to argue that Midland, the workers' compensation carrier, has no right to reimbursement from the proceeds of Colatrella's own insurance policy.

That argument requires us to review Montedoro, in which the Appellate Division found that a compensation lien attaches to the proceeds payable to an injured employee from the employer's uninsured motorist policy. 174 N.J.Super. at 308, 416 A.2d 433. In that case, the court rejected the argument that the lien attached only to the proceeds payable by a tortfeasor and his insurance carrier, finding no "reason why the Legislature would have intended an employee-accident victim of an uninsured driver to fare better than an employee-accident victim of an insured driver * * *." Id. The court left unresolved the issue before us, whether the compensation lien attaches to the proceeds recovered by the worker under his own uninsured motorist policy. Id. at 309, 416 A.2d 433.

An insurer's duty to satisfy claims under an uninsured motorist policy is triggered only if the insured is injured by the tortious conduct of a motorist. Indeed, it is the insured's burden in an arbitration proceeding with the insurer to prove that the hit-and-run driver was negligent. See 8C J. Appleman, Insurance Law and Practice § 5086.15 at 313, 316-17 (1981); Stanton, "Protection against Uninsured Motorists in New Jersey," 3 Seton Hall L.Rev. 19, 29 (1971); cf. N.J.S.A. 17:28-1.1a (insured entitled only to sum that he is "legally entitled" to recover as "damages"); Montedoro v. City of Asbury Park, supra, 174 N.J.Super. at 308-09, 416 A.2d 433 ("insured's legal entitlement to damages for the uninsured driver's negligence imports into the UM policy all of the normal rules governing tort liability and damages"). In effect, an uninsured motorist provision is a contractual substitute for a tort action against an uninsured motorist. By comparison, the acts of the third-party tortfeasor produce the recovery to which the compensation lien attaches. N.J.S.A. 34:15-40. Thus, the tortious act of a third party is the predicate for both recovery of uninsured motorist proceeds and the assertion of a workers' compensation lien. Because recovery under uninsured motorist insurance is premised on the tortious conduct of another, the proceeds of that recovery, like the proceeds of an injured employee's third-party action, should be subject to a compensation lien.

Although the worker is required to reimburse his compensation carrier from the proceeds of an uninsured motorist policy, this result does not deprive the worker of the benefit of his automobile insurance. The worker's total recovery need not be limited to the level of benefits provided by the workers' compensation law. Here, for example, Colatrella's uninsured motorist recovery was $18,000 more than his workers' compensation benefits.

We recognize that the rule elsewhere is that the employee may keep both the workers' compensation benefits and the proceeds of his uninsured motorist insurance. See 2A A. Larson, Workmen's Compensation Law § 71.23(a) at 14-18 n. 27 (1982). Nothing in the legislative history or terms of the uninsured motorist statute, N.J.S.A. 17:28-1.1, however, evinces a legislative intent that uninsured motorist proceeds should be protected from a compensation lien. On the other hand, in N.J.S.A. 34:15-40 the Legislature has expressed its intent that a compensation lien should attach to the recovery from a third-party tortfeasor. Thus, we remain persuaded that when a negligent motorist, including one who is uninsured or unidentified, injures a worker, a compensation lien should attach to the uninsured motorist proceeds recovered by the injured employee.

After we granted certification, another part of the Appellate Division declined to follow that court's decision in this matter as well as the Montedoro decision. Pullen v. Travelers Ins. Co., 206 N.J.Super. 227, 229, 502 A.2d 70 (1985). The Pullen court rejected the proposition that an injured worker who is paid twice for the same expenses, once by a workers' compensation carrier and again by an uninsured motorist carrier, is receiving double recovery. Id. at 232, 502 A.2d 70. Furthermore, the court found no evidence that the Legislature intended to prevent any such recovery. Id. The court reasoned that the right of a workers' compensation carrier to reimbursement under N.J.S.A. 34:15-40(b) from a "liable third person or his insurance carrier" did not extend to an uninsured motorist or a carrier that issues uninsured motorist coverage. Accordingly, the Pullen court concluded that a workers' compensation lien did not attach to the proceeds of the employee's uninsured motorist coverage. We disagree.

Arguably, as the Montedoro court found, the term "third...

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