Further Expansion of Governmental Immunity Exception to Workers’ Compensation Section 40 Liens

By Robert J. Fitzgerald, Esq.*

In Desmond v. Township of Parsipppany-Troy Hills, eta al., 2013 N.J. Super. Unpub. LEXIS 525 (March 5, 2013), the court addressed a complex case involving the governmental immunity exception to Section 40 of the New Workers’ Compensation Act (WCA). On July 19, 2005, the plaintiff, a sanitation truck driver, picked up a large rectangular trash receptacle and drove it to the Parsippany-Troy Hills Transfer Station. After weighing in, the plaintiff's truck was admitted to the "de-tarping" area, where he had to exit the truck and remove the tarp covering the receptacle. As he was doing so, the tarp strap broke, and he fell backwards. A moving truck in the adjacent lane ran over the plaintiff, and he sustained serious injuries. Travelers Insurance, the carrier for the plaintiff’s employer, paid workers' compensation benefits to the plaintiff in the amount of $927,907.03. The plaintiff filed a third-party complaint naming various defendants, including the maker of the allegedly defective tarp strap, the Morris County Municipal Utilities Authority (MCMUA), which ran the facility, and Waste Management of New Jersey (WMNJ), the owner of the truck that struck the plaintiff.

On October 7, 2010, the plaintiff entered into a joint confidential settlement agreement with MCMUA and WMNJ, resolving his claims against those entities. Only then, in January 2011, did the plaintiff give notice of the settlement to Travelers.

In March 2011, Travelers moved to intervene in the action to enforce its lien for reimbursement of those benefits pursuant to the WCA, specifically N.J.S.A. 34:15-40. The trial court granted the motion. On November 2, 2011, the plaintiff filed a motion seeking a determination that Travelers' workers' compensation lien would not attach to or reduce the amount of his joint settlement with MCMUA and WMNJ. The plaintiff maintained that N.J.S.A. 59:9-2(e), a provision of the Tort Claims Act (TCA), barred any claim that Travelers may have had for reimbursement from the monies recovered pursuant to the joint settlement. Travelers opposed the motion and filed a cross-motion to enforce its right to reimbursement under N.J.S.A. 34:15-40. The trial court determined that all of the monies recovered by the plaintiff as a result of the joint settlement of his claims with MCMUA and WMNJ were subject to reimbursement pursuant to N.J.S.A. 34:15-40.

On appeal, the plaintiff argued that Travelers should have been precluded from enforcing its lien against any of the settlement proceeds. The Superior Court first noted that, since it was undisputed that Travelers had paid the plaintiff workers' compensation benefits and that the plaintiff had entered into a joint settlement with MCMUA and WMNJ for damages for those same injuries, the TCA required that the amount of the compensation benefits be disclosed to the court. The court further stated that Travelers was not entitled to be reimbursed from the amount paid by MCMUA because it was a public entity, which was entitled to receive a credit for workers' compensation payments. In reaching that conclusion, the court indicated that an insurance company was in a better position to withstand contracted for losses than economically burdened public entities. However, Travelers was permitted to seek reimbursement of its compensation benefits from the monies the plaintiff had recovered from WMNJ—a mere public contractor.

The plaintiff had argued that the TCA barred Travelers from seeking reimbursement from the settlement monies the plaintiff received from WMNJ. It was the plaintiff's contention that, based on Vanchieri v. New Jersey Sports & Exposition Authority, 104 N.J. 80, 86 (1986), monies received from a “public contractor” should be protected from such reimbursement claims to the same extent as monies received from public entities or employees.

In Vanchieri, the plaintiff was injured by other patrons while attending a game at Giants Stadium and sued the New Jersey Sports & Exposition Authority, as well as the private entity engaged to provide security at the stadium. The court held that, while the security company was not entitled to immunity from tort claims, independent contractors share, to a limited extent, the immunity of public entities with whom they contract. The two-part rationale being that (1) public contractors are bound to comply with governmental specifications, as to which they have no control, and that (2) if contractors never shared government immunity, their costs of doing business would be higher and those higher costs would be passed on to the government entities hiring the contractors.

The court proclaimed that the TCA established a form of immunity that may extend to public contractors under the principles enunciated in Vanchieri. However, that immunity was not applicable in Desmond. Although the plaintiff presented the trial court with a copy of the contract between MCMUA and WMNJ, he did not submit the plans and specifications that governed WMNJ's operation of the facility. Moreover, the record was insufficient to determine whether WMNJ was complying with MCMUA's plans and specifications when the plaintiff was injured. The record was also insufficient to determine whether WMNJ deviated from the requirements of the plans and specifications and whether such a deviation was a proximate cause of the plaintiff's injuries.

Based on this, the court remanded the case to develop a record on what contributions MCMUA and WMNJ made to the joint settlement and whether the WMNJ's portion of the settlement was subject to immunity. Interestingly, the court also indicated that, if the plaintiff failed to disclose the information on the first issue, the court could again enter an order permitting Travelers to enforce its lien against all of the settlement proceeds as a punitive measure.

While the court’s opinion upholds an employer’s right of reimbursement for worker’s compensation benefits under Section 40, it may create more questions than it answers. For example, although governmental immunity is now expanded to "public contractors," that term is not defined. Would that immunity extend, perhaps, to an alleged sub-contractor, or possibly a third-party beneficiary of any government contract? What about traditional governmental services that are “privatized,” such as correctional services, school transportation, etc., which are performed by for-profit corporations? Are they now always immune from suits that arise from work-related injuries? I would anticipate that you will see more cases in the future, or possibly amendments to the WCA or TCA, to address this expansion of immunity. Practitioners should continue to investigate subrogation potential thoroughly for every claim and, when necessary, as in this case, intervene directly in the employee’s third-party action.

*Bob is a shareholder in our Cherry Hill, New Jersey, office. He can be reached at 856-414-6009 or rjfitzgerald@mdwcg.com.

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Defense Digest, Vol. 19, No. 2, June 2013