Court Clarifies What Constitutes a Clear Waiver of Section 40 Right

Tomaselli v. Petco, No. A-2252-24 (April 3, 2026)

In Tomaselli v. Petco, Petco appealed from a workers’ compensation order regarding the waiver of its N.J.S.A. 34:15-40 (“Section 40”) lien rights. On December 23, 2017, the petitioner was struck by a car while collecting shopping carts in Petco’s parking lot. He filed a workers’ compensation claim in February 2018, and Petco filed an answer with Sedgwick administering the claim on its behalf. The petitioner also filed a third party case and obtained a settlement of $85,000 in underinsured motorist (UIM) benefits and $15,000 in third party settlement.

Sedgwick sent a letter to the petitioner on June 28, 2021, advising of the Section 40 lien rights and noting the benefits paid to date, though medical treatment was ongoing. It noted Sedgwick agreed to accept $33,333.33 of the $85,000 from the UIM settlement and $15,000 from the third party settlement. On August 19, 2021, the petitioner’s counsel sent a check for $33,333.33 with a letter noting the check represented a final payment of the lien, which Sedgwick cashed.

After a workers’ compensation trial, the judge issued a written decision finding the petitioner suffered a compensable injury, exacerbating his pre-existing condition and found the $33,333.33 payment was in full satisfaction of the Section 40 lien and that Petco waived its future lien rights. Petco appealed the portion of the judgment regarding waiver.

The Appellate Division noted that neither party disputed Petco had the right to recover reimbursement under Section 40, absent the alleged settlement and waiver. The only issue on appeal was whether Petco waived its Section 40 lien rights. While Petco argued the letter describing the check as “full and final” was not a clear and unambiguous waiver of its rights, the Appellate Division disagreed, indicating the waiver did not have to be expressly stated as long as the party knew of its rights and clearly intended to waive them. The Appellate Division found that Sedgwick’s cashing of the check with the letter resulted in the waiver. Petco also argued the letter did not explicitly reference Section 40 and that accepting the $33,333.33 was only for the accrued amount to date. However, the Appellate Division noted Petco was not entitled to the third party proceeds except by virtue of the Section 40 lien and Petco could have waited until the workers’ compensation case resolved before perfecting its lien. The Appellate Division also pointed out that Petco could have insisted on the full third party recovery amount at the time it accepted the $33,333.33 as it already paid more than the third party amount.