The New Jersey Supreme Court held that an employer’s subrogation reimbursement rights under the New Jersey Workers’ Compensation Act are not barred by the Automobile Insurance Cost Reduction Act.
In this per curiam decision, the New Jersey Supreme Court affirmed an Appellate Division ruling which found the state’s no-fault auto insurance scheme, under the Automobile Insurance Cost Reduction Action, N.J.S.A. 39:6A-1.1 et seq. (AICRA), did not bar an employer from bringing a third-party action under Section 40 of the New Jersey Workers’ Compensation Act., 34:15-1 et seq. in order to recoup workers’ compensation costs incurred for a work-related motor vehicle accident.
David Mercogliano, a bus driver with New Jersey Transit, was involved in a motor vehicle accident when the bus he was driving was rear-ended by an automobile driven by Sandra Sanchez. New Jersey Transit’s workers’ compensation carrier paid benefits to, and on behalf of, Mercogliano for treatment he received for injuries sustained in the motor vehicle accident, as well as for his time out of work. Mercogliano neither sought nor received PIP benefits under his automobile insurance policy in connection with his accident. As Mercogliano chose not to pursue a negligence claim, New Jersey Transit itself initiated a subrogation action under Section 40 of the Act, which gives an employer the right to pursue a third-party action for recovery of workers’ compensation benefits paid to, and on behalf of, its employee.
In response to New Jersey Transit’s claim, Sanchez moved for summary judgement. Sanchez maintained that, because Mercogliano had elected the verbal threshold option permitted by AICRA and sustained no permanent injury, he was barred from pursuing damages for pain and suffering under AICRA. As such, the defendant argued that New Jersey Transit, as subrogee for Mercogliano, was similarly barred from pursuing a third-party action.
The trial court granted Sanchez’s motion for summary judgement and dismissed New Jersey Transit’s subrogation action. In the trial court’s view, Mercogliano had been fully compensated for his economic damages and, as he was unable to pursue damages for pain and suffering under AICRA, New Jersey Transit did not have an independent right to subrogate against a third party. Therefore, the trial court found New Jersey Transit’s subrogation action must be dismissed.
The Appellate Division reversed the trial court, noting the the Workers’ Compensation Act is the exclusive remedy for an employee who suffers a work-related injury. As long as the employee’s injuries were caused by a third party and not the employer, the Appellate Division reasoned, the Act gives the workers’ compensation carrier an absolute right to seek reimbursement from the tortfeasor for the benefits it has paid to the injured employee, regardless of whether or not the employee has been fully compensated.
In affirming the Appellate Division’s ruling, the Supreme Court agreed that New Jersey Transit’s subrogation action arose from “economic loss comprised of medical expenses and wage loss, not noneconomic loss,” namely, pain and suffering, and rejected the trial court’s view that a subrogation claim based on benefits paid for economic loss contravenes AICRA’s intent. As the Supreme Court reasoned:
We discern no evidence that the legislature intended to bar a workers’ compensation subrogation claim by virtue of the very benefits that created that claim in the first place. [W]e conclude that Mercogliano suffered an economic loss in the form of medical expenses and lost wages, and that New Jersey Transit paid him benefits for that economic loss. The legislature made clear that when an employee injured in a work-related accident is entitled to benefits under the Workers’ Compensation Act, that statute—not AICRA—provides his or her primary source of recovery for medical expenses and lost wages.
The Supreme Court acknowledged that in the event only workers’ compensation benefits and PIP benefits are available sources of reimbursement, the so-called “collateral source rule,” N.J.S.A. 39:6A-6, places the primary burden on the employer’s workers’ compensation carrier to compensate an employee injured in the course of employment. However, the Supreme Court noted where both workers’ compensation benefits and the proceeds of a tort action have been recovered, the tort recovery is primary under Section 40 of the Act. Accordingly, the Supreme Court found no evidence of conflict between AICRA and the Act which would bar New Jersey Transit’s subrogation action.
This decision represents a significant victory on the part of workers’ compensation carriers. By unequivocally barring the use of AICRA as an obstacle to subrogation, the Supreme Court’s holding preserves an employer’s right to reimbursement for medical and indemnity benefits paid to an injured worker as a result of a work-related motor vehicle accident where a third party is at fault. As such, the Supreme Court’s ruling demonstrates a clear intent to leave intact one of the workers’ compensation carrier’s most effective cost-saving tools.
What's Hot in Workers' Comp 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. We would be pleased to provide such legal assistance as you require on these and other subjects when called upon. ATTORNEY ADVERTISING pursuant to New York RPC 7.1 Copyright © 2020 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. No part of this publication may be reprinted without the express written permission of our firm. For reprints or inquiries, or if you wish to be removed from this mailing list, contact tamontemuro@mdwcg.com.