Not So Fast!!! The Court Reverses Dismissal of Unjust Enrichment Claim for Overpayment of Workers’ Compensation Benefits

By Robert J. Fitzgerald, Esq.*

In Adam Weiner v. Elizabeth Board of Education, 2013 N.J. Super. Unpub. LEXIS 1729 (N.J. Super. App. Div. July 15, 2013), the New Jersey Appellate Division addressed the issue of what process is required in order to properly evaluate an unjust enrichment claim. The fact of the case are straightforward. On October 18, 2000, Weiner received an award of permanent/total disability that entitled him to payments of $480 per week. On January 9, 2001, the award was amended to $340.98 per week to reflect the social security offset rate. On April 1, 2002, Weiner began receiving ordinary disability pension benefits, in addition to his workers’ compensation benefits, and did not disclose his receipt of disability pension benefits to his former employer.

Eight years later, the employer requested authorization for access to Weiner’s pension records to determine if an offset was applicable. When the records were provided, the employer, for the first time, became aware that Weiner had been receiving disability pension benefits. On August 10, 2011, Weiner and the employer entered into a consent agreement prospectively reducing the petitioner’s disability rate to $222.39.

The employer also filed a motion seeking reimbursement of the past excess worker’s compensation benefits Weiner received from April 1, 2002, through August 10, 2011. A hearing was held before a workers’ compensation judge on August 1, 2012. The judge denied the employer’s motion. On appeal, the employer argued that it was entitled to recover the overpayment because Weiner was unjustly enriched and he could not establish a defense of equitable estoppel.

In analyzing the appeal, the Appellate Division stated that there is a two-step process to recover an overpayment. First, it must be determined if the petitioner was unjustly enriched, an issue for which the respondent employer has the burden of proof. If the respondent succeeds, it may then institute enforcement proceedings in the Law Division. This process allows an employer to recover in a faultless overpayment situation, since “an underlying theme of the workers’ compensation law is that there should not be duplicative payments for the same disability.” Montgomery v. Abex Corp., 602 A.2d 290, 891 (N.J. Super. App. Div. 1992).

To establish unjust enrichment, an employer must show both that the petitioner received a benefit and that retention of that benefit without payment would be unjust. Assocs. Commercial Corp. v. Wallia, 511 A.2d 709, 716 (N.J. Super. App. Div. 1986). It is considered unjust enrichment to permit the recipient of money paid under mistake of fact to keep it, unless the circumstances are such that it would be inequitable to require its return. PaineWebber, Inc. v. Levy, 680 A.2d 798, 799 (N.J. Super. Law Div. 1995).

The workers’ compensation judge determined that, given Weiner’s inability to work and his limited income, to compel him to repay would be “inequitable.” In reversing the dismissal of the employer’s motion for reimbursement, the Appellate Division noted that the only basis for the workers’ compensation judge’s decision was a reference to Weiner’s tax returns, the most recent of which showed an annual salary of $17,295 for 2010. The Appellate Division criticized that no evidential hearing was held. Further, it disapprovingly remarked that Weiner’s assets and liabilities (net worth) had not been considered.

The Appellate Division remanded the case for a complete evidentiary hearing regarding whether Weiner had “limited resources” and whether it “would be inequitable” to require him to repay the duplicative benefits he had received. Interestingly, the court even indicated that it would be appropriate for the workers’ compensation judge to consider an appropriate repayment plan.

The Weiner decision is important because it reaffirms the principle that employers are entitled to reimbursement when an overpayment in benefits occurs in error. A petitioner’s claimed inability to pay, by itself, is insufficient to deny repayment. In litigating similar claims, employers should adopt a “no stone left unturned” mentality and seek any and all financial information from a petitioner so the court can properly consider a potential repayment order, or even an “appropriate repayment plan” as referenced by this decision.

If you think you have made an overpayment or improper payment of disability benefits, you should talk with your legal counsel immediately. The longer an overpayment issue goes unresolved, the less likely it is you will achieve a satisfactory financial recovery.

*Bob, a shareholder in our Cherry Hill, New Jersey, office, can be reached at 856.414.6009 or rjfitzgerald@mdwcg.com.

Defense Digest, Vol. 19, No. 4, December 2013

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 © 2013 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. This article may not be reprinted without the express written permission of our firm.