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Enforcement of an eight-year-old reimbursement obligation between workers' compensation carriers survives equitable estoppel and laches arguments.

July 1, 2010
Kathleen Patry v. West Jersey (as self-insured) and West Jersey (as insured by Insurance Carrier), Docket No. A-0843-08T10843-08T1 (App. Div., decided January 8, 2010)

The petitioner, Kathleen Patry, sustained two work-related injuries while in the employ of West Jersey. At the time of her first injury, which occurred on November 4, 1991, West Jersey was insured by an Insurance Carrier ("the Carrier"). The petitioner sustained a second injury on October 20, 1992, at which time West Jersey was self-insured and its claims were administered by a Third Party Administrator (" the TPA"). The petitioner filed claim petitions with the Division of Workers’ Compensation, as well as a Verified Petition to Join the Second Injury Fund, alleging that she was permanently and totally disabled as a result of her two injuries with West Jersey in combination with certain pre-existing conditions. The Carrier, TPA and the Second Injury Fund all conceded that the petitioner was permanently and totally disabled. On March 31, 1999, an Order of Total Disability was entered by the judge of compensation declaring the petitioner to be permanently and totally disabled under N.J.S.A. 34:15-12b. In relevant part, the Order provided that the Carrier would manage and pay for the petitioner’s continued medical care and the TPA would reimburse the Carrier for 50 percent of the costs of same. In a letter dated April 2, 1999, from the Carrier to the TPA, the Carrier inquired as to the name of the person with the TPA whom the Carrier should contact were there any questions or difficulties in obtaining reimbursement from the TPA for the petitioner’s medical costs. There was no further communication between the Carrier and the TPA until an April 10, 2007, letter from the Carrier to the TPA seeking reimbursement of 50 percent of the over $1 million in costs which the Carrier had incurred to date in connection with the petitioner's ongoing medical care. The TPA did not respond to the Carrier's correspondence. On January 18, 2008, the Carrier moved to enforce the court’s March 31, 1999, Order. In response thereto, the TPA filed a Certification in Opposition. Following oral argument, the judge of compensation granted the Carrier's Motion and on September 17, 2008, issued an Order to Enforce, instructing the TPA to bring itself into compliance with the court’s March 31, 1999, Order. On appeal, the TPA argued that the Carrier's claim for reimbursement should have been denied pursuant to either the doctrine of equitable estoppel or the doctrine of laches. The Appellate Division affirmed the judge of compensation's ruling. In finding that the defense of equitable estoppel was inapplicable, the Appellate Division relied on Knorr v. Smeal, 178 N.J. 169 (2003). In Knorr, the court held that equitable estoppel is designed to prevent a party from "disavowing its previous conduct where that conduct amounts to concealment or misrepresentation of material fact; where the conduct was intended to be acted upon by the adverse party; and where the adverse party does in fact rely thereon in good faith in prejudicially changing its position." The Appellate Division found that Scibal presented no evidence that NJM either concealed or misrepresented the costs or reimbursements it sought, or that NJM wanted or should have expected Scibal to act in reliance to NJM’s silence. As to the issue of detrimental reliance, Scibal had not shown that it relied on NJM’s silence to its own detriment. In fact, at the time of oral argument, Scibal showed only potential prejudices which might have ensued from its reliance on NJM’s silence, rather than evidence of any actual prejudice. The Appellate Division concluded that Scibal’s argument that equitable estoppel bars reimbursement must fail because Scibal had not proven any of the key elements necessary for an equitable estoppel defense. As to the doctrine of laches, the Appellate Division relied once again on Knorr. The Knorr Court held that "the doctrine of laches is invoked to deny a party enforcement of a known right when the party engages in an inexcusable and unexplained delay in exercising that right to the prejudice of the other party." “The core equitable concern in applying laches,” the Knorr Court concluded, “is whether a party has been harmed by the delay.” Here, the Appellate Division found that the record was absent any such evidence of harm. "Scibal has not offered any facts to prove that it was prejudiced by NJM's eight-year silence," the Appellate Division reasoned, "and the workers' compensation court appropriately acknowledged that the passage of time alone, without evidence of prejudice, is not a sufficient basis for a laches defense."

Case Law Alert - 3rd Qtr 2010

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Dario J. Badalamenti
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(973) 618-4122
djbadalamenti@mdwcg.com

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