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NEW JERSEY WORK INJURY LAWYERS CONSIDER COURT OF APPEALS DECSION ON THE REPAYMENT OF LIENS FROM AN AWARD OF COMPENSTION ISSUED BY A JUDGE OF COMPENSATION IN THE STATE OF NEW JERSEY

 Pool v. Morristown Memorial Hospital, 400 N.J. Super. 572 (App. Div. 2008)

             Plaintiff suffered a knee injury at her workplace. After being initially diagnosed as having a minor knee sprain and discharged, she returned to the hospital's emergency room in extreme pain and was diagnosed with a serious infection which resulted in the amputation of both legs, her right arm, and four fingers of her left hand. Plaintiff filed a workers' compensation claim, which resulted in an award of $400,000 in permanent and total disability with an expectation of additional benefits for the rest of her life. She later filed a medical malpractice action against the hospital and others. The hospital settled for $125,000 and the workers' compensation statutory lien, N.J.S.A. 34:15-40, held by appellant Workers' Compensation Security Fund, attached to that recovery. Plaintiff went to trial against the remaining defendants, but before the jury could render its verdict, plaintiff and defendant Richard D. Shih entered into what they have referred to as a “verdict risk limiting” agreement. The agreement guaranteed-regardless of the jury's verdict-that plaintiff would receive no less than $100,000 and no more than $3,500,000. The jury rendered a “no cause” verdict, and, based on her agreement with defendant Shih, plaintiff received $100,000.

            Plaintiff thereafter filed a motion in this action, seeking a declaration that the fund's statutory lien did not attach to the $100,000 payment. The fund's statutory lien attaches by law to any “sum in release or in judgment on account of [a third person's] liability to” the employee. The trial judge concluded that the payment did not meet this statutory definition and granted plaintiff's motion, but the Appellate Division disagreed and reversed. The court the question to be determined is whether the agreement to make a payment was made in contemplation of and while the alleged tortfeasor was in the course of responding to or defending against a claim brought by the employee. Accordingly, the lien attaches as well to an alleged tortfeasor's promise to pay in order to avoid the consequences of a verdict yet to be delivered, as here. Defendant Shih's $100,000 payment to plaintiff was a settlement and was offered and accepted as the means for resolving the parties' differences, subject only to the rendering of a jury verdict for the sole purpose of filling in the agreement's gaps by defining the amount Shih had agreed to pay. This constituted a settlement of the type encompassed by N.J.S.A. 34:15-40 because it was generated by, and made in contemplation of, plaintiff's suit against Shih and was the consideration she agreed to accept in order to resolve that litigation. As a result, the court concluded that the payment to the employee of the “low” defined by a high/low agreement, which agreement preceded a decision or verdict in favor of an alleged tortfeasor, is subject to the employer's statutory lien.

 

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