Judge of compensation may exercise jurisdiction over an insurance coverage dispute if ancillary to a claim currently before the Division of Workers' Compensation.
The petitioner was a proprietor and employee of the defendant, a limited liability company. In early 2008, the petitioner, acting as a representative of the employer, submitted an application for workers' compensation coverage to the plaintiff insurance carrier. Contained in the employer's original application to the insurance carrier were express representations by the petitioner that all of the employer's employees performed their work "at ground level" and that all "tree work" was subcontracted out to other companies. Based on these representations, the insurance carrier issued a workers' compensation policy to the employer for the period from March 10, 2008, through March 10, 2009.
On June 27, 2008, the petitioner was injured when he fell while pruning tree branches for a client. At the time of the accident, the petitioner was situated approximately 35 feet above the ground in a bucket-truck. This fall resulted in significant bodily injury. On August 27, 2008, the petitioner filed a claim with the Division of Workers' Compensation seeking medical treatment and temporary disability benefits. In response, the insurance carrier informed the employer in writing that it disclaimed coverage "due to a material misrepresentation made by the claimant himself as a member of the insured entity."
On September 8, 2008, the insurance carrier filed a complaint in the Law Division for a declaratory judgment against the employer and the petitioner seeking rescission of its policy and a declaration that the policy was null and void as to the petitioner's claim. On June 12, 2009, the Law Division dismissed the insurance carrier's complaint without prejudice and transferred it to the Division of Workers' Compensation for findings as to the policy's validity.
On September 16, 2010, the Judge of Compensation declined jurisdiction to void the policy as sought by the insurance carrier but, instead, recommended that the parties seek appellate review in order to resolve the jurisdictional issue. The insurance carrier appealed.
The Appellate Division reversed the Judge of Compensation's order declining jurisdiction and remanded for a determination as to the rescission issue. In doing so, the Appellate Division relied on its prior holding in Frappier v. Eastern Logistics, Inc., 400 N.J. Super. 410 (App. Div. 2008) in which the court held that the Division of Workers' Compensation can resolve coverage disputes related to an underlying claim which is appropriately before the Division. The Appellate Division reasoned that, as the New Jersey Workers' Compensation Act bestows upon the Division of Workers' Compensation exclusive jurisdiction of all claims for workers' compensation benefits, it stands to reason that it also grants the authority necessary to decide issues of coverage as pertains to those claims. In quoting Larson's Workers' Compensation Law, the Appellate Division concluded, "[W]hen ancillary to the determination of the employee's rights, the [Division of Workers' Compensation] has authority to pass upon a question relating to the insurance policy, including fraud in procurement, mistake of the parties, reformation of the policy, cancellation, existence or validity of an insurance contract, coverage of the policy at the time of injury, and construction of extent of coverage."
Case Law Alert - 1st Qtr 2012