Merely Dictum or Controlling Decision? Recent Appellate Decision Addresses Right to Section 40 Recovery Against UIM Policy

By Nancy L. Musser, Esq.*

In a decision that has practitioners scratching their heads in bewilderment, the New Jersey Appellate Division held in Dever v. New Jersey Manufacturers Insurance Company, 2013 N.J. Super. Unpub. LEXIS 2553 (N.J. Super. App. Div. October 23, 2013) that a workers’ compensation respondent has no right to recover its lien for medical benefits against a UIM carrier. This decision may be of dubious validity, however.

John Dever was an on-duty Atlantic City police officer injured when his police vehicle was struck by a vehicle operated by Alice Turner. Turner had only a $25,000 policy limit, which was tendered to Dever, who in turn proceeded against his underinsured motorist (UIM) policy issued by New Jersey Manufacturers Insurance Company (NJM). At trial, the parties stipulated to liability, with an agreement to cap damages at the $500,000 policy limits, as reduced by Turner’s payment.

Despite trial testimony relating to the extent of the plaintiff’s injuries and the award of an accidental disability retirement pension to the petitioner due to his inability to return to his normal duties as an officer, the jury determined that he failed to prove a permanent injury and awarded nothing for pain and suffering. Nevertheless, the jury awarded the petitioner $275,000 as compensation for his economic loss.

Both parties filed post-judgment motions challenging the verdict. The plaintiff’s arguments focused upon whether he had produced sufficient evidence to prove that he had suffered non-economic loss, specifically addressing the judge’s instructions to the jury and also the verdict sheet. The defendant argued that the plaintiff had been overcompensated, contending that the plaintiff’s injuries were only temporary.

NJM also argued that it should not have been required to reimburse the plaintiff for medical expenses. It was noted by the court that the plaintiff was unquestionably within the course and scope of his employment at the time of accident. He had filed a workers’ compensation claim, with that carrier paying all medical bills and placing a lien upon the plaintiff’s recovery from the tortfeasor under N.J.S.A. 34:15-40 (Section 40). The Appellate Division commented that the record before it did not indicate whether the workers’ compensation insurance carrier was paid $8,482.11 from the plaintiff’s settlement with Turner; however, it is this sum that NJM was required to pay the plaintiff by the trial judge and, thus, the sum in issue.

It is upon this issue that the Dever court fixates, with considerable focus upon the interplay between the personal injury protection (PIP) statute and the workers’ compensation statute. First, the court observed that under New Jersey’s system of no-fault automobile insurance, medical benefits are paid without regard to who caused the accident, hence “no-fault” insurance. The court found that this statutory concept was devised as a trade-off for lower premiums and prompt payment of medical expenses. Accordingly, an injured person who is the beneficiary of PIP payments cannot recover those amounts already paid from the tortfeasor.

The Dever court next examined the workers’ compensation statute. It noted that workers’ compensation is the primary source of satisfaction of a plaintiff’s medical bills in an automobile accident, with the recognized right of the PIP carrier to seek reimbursement from the workers’ compensation carrier in instances where the plaintiff has only collected PIP benefits.

The court then addressed third-party claims, stating that Section 40 was enacted to prevent a double recovery, and noting that Section 40 had previously been found to require reimbursement when an employee obtains a UIM recovery. However, the Dever court went on to state that because the plaintiff cannot recover medical expenses provided under PIP from the tortfeasor’s no-fault policy, there would be no recovery of medical benefits between New Jersey no-fault insureds.

The Dever court concluded that, “[t]o allow reimbursement to a workers’ compensation carrier from an employee’s UIM carrier is counter to the legislative intent of the express statutory reimbursement scheme.” It was not within the court’s record whether the workers’ compensation carrier had invoked its Section 40 lien against the $25,000 payment from Turner, which the court nevertheless concluded would be inappropriate. The plaintiff’s medical expenses were found to be the responsibility of the workers’ compensation carrier, and vacated the order that required NJM to pay $8,482.11.

It is important to note that the workers’ compensation carrier was not a party to this action, and there is no indication that its position was briefed for consideration by the court. It appears that NJM had argued that it did not owe the sum of $8,482.11, as that amount had previously been paid by the workers’ compensation carrier. The court takes a leap forward, however, in addressing and limiting the subrogation rights of an absent party. As such, the question becomes whether the Dever decision is merely dictum with respect the rights of workers’ compensation carriers or whether that portion of the court’s decision may be considered precedential. It is clear that counsel for employees will take the position that there is no right to subrogation of medical benefits in automobile cases.

*Nancy is Special Counsel in our Cherry Hill, New Jersey, office who can be reached at 856.414.6119 or nlmusser@mdwcg.com.

Defense Digest, Vol. 20, No. 1, March 2014

Defense Digest is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. Copyright © 2014 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. This article may not be reprinted without the express written permission of our firm.