New Jersey Property-Liability Ins. Guar. Ass'n v. State

• Citation: 477 A.2d 826,195 N.J.Super. 4
• Decision Date: 22 June 1984
• Docket Number: PROPERTY-LIABILITY
• Parties: NEW JERSEYINSURANCE GUARANTY ASSOCIATION and Long Island Insurance Company in liquidation, Plaintiffs-Respondents, v. STATE of New Jersey, Defendant-Appellant, and Elwood Bell and Lillian Bell, Nathaniel Murray and Charlotte Murray, guardians ad litem of Nathaniel Rodger Murray, an infant, Defendants-Respondents, and Nathaniel MURRAY and Charlotte Murray, guardians ad litem of Nathaniel Rodger Murray, an infant, Plaintiffs, v. STATE of New Jersey, Elwood Bell and Lillian Bell, Defendants.
• Court: New Jersey Superior Court — Appellate Division

Page 4

195 N.J.Super. 4

477 A.2d 826

NEW JERSEY PROPERTY-LIABILITY INSURANCE GUARANTY ASSOCIATION and Long Island Insurance Company in liquidation, Plaintiffs-Respondents, v. STATE of New Jersey, Defendant-Appellant, and Elwood Bell and Lillian Bell, Nathaniel Murray and Charlotte

Murray, guardians ad litem of Nathaniel Rodger

Murray, an infant, Defendants-Respondents,

and

Nathaniel MURRAY and Charlotte Murray, guardians ad litem of

Nathaniel Rodger Murray, an infant, Plaintiffs, v. STATE of New Jersey, Elwood Bell and Lillian Bell, Defendants.

Superior Court of New Jersey Appellate Division.

Argued Dec. 6, 1983.

Decided June 22, 1984.

Jerry Fischer, Deputy Atty. Gen., for defendant-appellant State of N.J. (Irwin I. Kimmelman, Atty. Gen., attorney; James J. Ciancia, Asst. Atty. Gen., of counsel; Jerry Fischer, on the brief).

R. Alan Aslaksen, Audubon, for plaintiffs-respondents New Jersey Property-Liability Ins. Guar. Ass'n and Long Island Ins. Co. in liquidation.

Angelo J. DiCamillo, Lindenwood, for defendants-respondents Elwood Bell and Lillian Bell (Riley & DiCamillo, Lindenwold, attorneys; Angelo J. DiCamillo, on the brief).

Seth Grossman, Atlantic City, for defendants-respondents Nathaniel Murray and Charlotte Murray, guardians ad litem of Nathaniel Rodger Murray, an infant.

Before Judges MICHELS, KING and DREIER.

The opinion of the court was delivered by

MICHELS, P.J.A.D.

Defendant State of New Jersey appeals from a judgment of the Chancery Division declaring that defendants Elwood Bell and Lillian Bell (Bells), as foster parents, were State employees for purposes of the New Jersey Tort Claims Act, N.J.S.A. 59:1-1 et seq., and therefore entitled to indemnification for damages, counsel fees and costs incurred as the result of an action brought against them by plaintiffs Nathaniel Murray and Charlotte Murray (Murrays), the natural parents of Nathaniel Rodger Murray, a child who was injured while in their care.

The background of this case is adequately set forth in the opinion of the trial court in N.J. Property Liab., etc. v. State, 184 N.J.Super. 348, 446 A.2d 189 (Ch.Div.1982), and need only be summarized here. The Bells were approved foster parents for the State of New Jersey. In 1978, two apparently abandoned juveniles, Nathaniel Rodger Murray and his sibling, were found and turned over to the Division of Youth and Family Services (DYFS). DYFS placed the children with the Bells on a temporary basis while the natural parents were sought. During this time, Nathaniel was accidently injured. When his parents were located and Nathaniel returned to them, they instituted a negligence suit in the Law Division against both the State and the Bells. The State refused to defend or indemnify the Bells, and their insurance carrier, plaintiffs New Jersey Property-Liability Insurance Guaranty Association and the Long Island Insurance Company in liquidation, then instituted suit in the Chancery Division against the State, the Bells and the Murrays, seeking a declaration that the State was obligated to defend and indemnify the Bells. The two actions were consolidated and the Chancery Division entered judgment declaring that the Bells were State employees and thus entitled to defense and indemnification. ¹ This appeal followed.

The New Jersey Tort Claims Act requires the Attorney General to defend any State employee who is sued on account of an act or omission occurring in the scope of his employment. N.J.S.A. 59:10A-1. Indemnification for the State employee is authorized both when the Attorney General provides for the employee's defense, N.J.S.A. 59:10-1, and when the Attorney General refuses to provide for the employee's defense. N.J.S.A. 59:10-2. "Employee" is defined to include:

... an officer, employee or servant, whether or not compensated or part-time, who is authorized to perform any act or service; provided, however, that the term does not include an independent contractor. [ N.J.S.A. 59:1-3]

The few reported decisions involving "employee" as it is used in N.J.S.A. 59:1-3 shed little light on how the word should be construed. See Woodsum v. Pemberton Tp., 172 N.J.Super. 489, 521, 412 A.2d 1064 (Law Div.1980), aff'd 177 N.J.Super. 639, 427 A.2d 615 (App.Div.1981); Malloy v. State, 148 N.J.Super. 15, 24, 371 A.2d 806 (App.Div.1977), rev'd 76 N.J. 515, 388 A.2d 622 (1978); Girard v. Alverez, 144 N.J.Super. 259, 262, 365 A.2d 220 (App.Div.1976). See also Vacirca v. Consolidated Rail Corp., 192 N.J.Super. 412, 417, 470 A.2d 50 (Law Div.1983); Martin v. Tp. of Rochelle Park, 144 N.J.Super. 216, 221, 365 A.2d 197 (App.Div.1976). Guidance must therefore be sought from common-law principles.

It has long been recognized that control by the master over the servant is the essence of the master-servant relationship on which the doctrine of respondeat superior is based. See, e.g., Cuff v. Newark & New York R. Co., 35 N.J.L. 17, 23 (Sup.Ct.1870), aff'd o.b., 35 N.J.L. 574 (E. & A. 1871); Courtinard v. Gray Burial Co., 98 N.J.L. 493, 495, 121 A. 145 (E. & A. 1922). Under the control test, "[t]he relation of master and servant exists whenever the employer retains the right to direct the manner in which the business shall be done, as well as the result to be accomplished, or in other words, not only what shall be done, but how it shall be done." Errickson v. Schwiers Co., 108 N.J.L. 481, 483, 158 A. 482 (E. & A. 1931). In contrast to a servant, an independent contractor is defined as "one who, carrying on an independent business, contracts to do a piece of work according to his own methods, and without being subject to the control of his employer as to the means by which the result is to be accomplished, but only as to the result of the work." Errickson, supra; accord, Wilson v. Kelleher Motor Freight Lines, Inc., 12 N.J. 261, 264, 96 A.2d 531 (1953).

Following enactment in this State of workers' compensation legislation, our courts applied the control test--used to identify the master-servant relationship--in order to determine whether a claimant is an "employee" as it was defined in the Workers' Compensation Act, N.J.S.A. 34:15-36, L. 1911, c. 95, § 23, as amended. ² See, e.g., DeMonaco v. Renton, 18 N.J. 352, 355, 113 A.2d 782 (1955); Piantanida v. Bennett, 17 N.J. 291, 294-295, 111 A.2d 412 (1955); Wilson, supra; Errickson, supra; Essbee Amusement Corp. v. Greenhaus, 114 N.J.L. 492, 493, 177 A. 562 (Sup.Ct.1935).

However, use of the control test to determine whether one is an employee for purposes of social legislation such as the Workers' Compensation Act is inapposite because "[the basic purpose for which the definition is used in compensation law is entirely different from the common-law purpose]." Larson, Workmen's Compensation Law, § 43.42 at 8-16 (1982) (emphasis in original). Although it is logical to condition the master's liability to a third party for the torts of a servant on the control over the servant which the master has the right to exercise, absence of control is not necessarily significant where the employee himself seeks compensation for work-related injuries. See Larson, Workmen's Compensation Law, supra; Brower v. Rossmy, 63 N.J.Super. 395, 404, 164 A.2d 754 (App.Div.1960) certif. den. 34 N.J. 65, 167 A.2d 54 (1961); Marcus v. Eastern Agricultural Ass'n, Inc., 58 N.J.Super. 584, 602, 157 A.2d 3 (App.Div.1959) (Conford, J.A.D., dissenting), rev'd on dissent, 32 N.J. 460, 161 A.2d 247 (1960). As Judge Conford observed in his dissent in Marcus:

... there are various situations in which the control test does not emerge as the dispositive factor. For example, where it is not in the nature of the work for the manner of its performance to be within the hiring party's direct control, the factor of control can obviously not be the critical one in the resolution of the case, but takes its place as only one of the various potential indicia of the relationship which must be balanced and weighed in determining what, under the totality of the circumstances, the character of that relationship really is. [58 N.J.Super. at 597, 157 A.2d 3]

Accord, DeMonaco, supra, 18 N.J. at 357, 113 A.2d 782; Hannigan v. Goldfarb, 53 N.J.Super. 190, 196-197, 147 A.2d 56 (App.Div.1958).

Reversing the judgment of the Appellate Division on the basis of Judge Conford's dissent, the Supreme Court adopted a new test of the employer-employee relationship:

... the test in the type of case before us here must, therefore, be essentially an economic and functional one, and the determinative criteria not the inconclusive details of the arrangement between the parties, but rather the extent of the economic dependence of the worker upon the business he serves and the relationship of the nature of his work to the operation of that business. [58 N.J.Super. at 603, 157 A.2d 3]

It has been repeatedly recognized, both implicitly and explicitly, that the "relative nature of the work" test was adopted in Marcus for purposes of defining the employer-employee relationship in workers' compensation cases. See, e.g., Caicco v. Toto Brothers, Inc., 62 N.J. 305, 309, 301 A.2d 143 (1973); Kalnas v. Layne of New York Co., 173 N.J.Super. 492, 497, 414 A.2d 607 (App.Div.1980); Smith v. E.T.L. Enterprises, 155 N.J.Super. 343, 351, 382 A.2d 939 (App.Div.1978); Rossnagle v. Capra and Shell Oil Co., 127 N.J.Super. 507, 517, 318 A.2d 25 (App.Div.1973), aff'd o.b. 64 N.J. 549, 318 A.2d 20 (1974); Tofani v. LoBiondo Brothers Motor Express, Inc., 83 N.J.Super. 480, 486, 200 A.2d 493 (App.Div.1964), aff'd o.b. 43 N.J. 494, 205 A.2d 736 (1964); Buchner v. Bergen Evening Record, 81 N.J.Super. 121, 130, 195 A.2d 22 (App.Div.1963); Brower, supra, 63 N.J.Super. at 404, 164 A.2d 754. The rationale behind allowing a broader test of "employee" in the context of workers' compensation cases is grounded in the fact that, as social legislation, the New Jersey Workers' Compensation Act is to be liberally construed in order that its beneficent purposes may be...