Section 40 lien attaches to third-party recovery even though net proceeds don’t exceed costs of litigation.

The petitioner sustained an injury to his right hand at work while operating a meat perforating machine. He filed a claim with the Division of Workers’ Compensation for which he received both medical and indemnity benefits. He also filed a tort action against the manufacturer of the machine, which was submitted to binding arbitration. Though the arbitrator found no liability as to the third-party defendant, pursuant to a “high/low” agreement, the petitioner recovered $25,000, all of which went to litigation costs and attorney’s fees. The respondent brought a motion to enforce its lien pursuant to N.J.S.A. 34:15- 40, which allows for a compensation lien to attach to an employee’s recovery against any other tortfeasors. The Judge of Compensation ruled that, despite the petitioner’s failure to recover any net monies from his third-party action, the respondent was entitled to reimbursement of up to two-thirds of the amount of medical and indemnity benefits it had paid. The petitioner appealed.

In affirming the Judge of Compensation’s ruling, the Appellate Division relied on Frazier v. N.J. Mfrs. Ins. Co., 142 N.J. 590 (1995), where the New Jersey Supreme Court held that a statutory lien attaches under N.J.S.A. 34:15-40 regardless of whether the cumulative awards are sufficient to fully compensate the injured worker. The Appellate Division concluded that, no matter how atypical or novel the nature of the settlement agreement, the respondent’s lien attached to the petitioner’s third-party proceeds as a derivative of the petitioner’s suit against a third-party tortfeasor.

_{Case Law Alerts, 3rd Quarter, July 2016}

_{Case Law Alerts is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent 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 © 2016 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. This article may not be reprinted without the express written permission of our firm.}