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Worker's Compensation Subrogation Claim Not Subject to Verbal Threshold Defense:

Legal Victory for Law Offices of Jan Meyer

By: Noah Gradofsky, Law Offices of Jan Meyer and Associates, P.C., April 30, 2018

In certain situations, New Jersey's Verbal Threshold, N.J.S.A. 39:6A-8 et. seq. limits recovery of noneconomic damages (i.e. pain and suffering) unless the injured party demonstrates that the injured party has sustained certain injuries. See our discussion of the verbal threshold here.

In Cont'l Ins. Co. v. McClelland, 288 N.J. Super. 185, (App. Div. 1996), the New Jersey Appellate Division issued a decision that seemed to imply that a worker’s compensation subrogation claim can be subject to verbal threshold (and indeed, the court at one point says that its decision turns on whether or not the subrogation claim is subject to verbal threshold). Law Offices of Jan Meyer and Associates, P.C. has long argued that this understanding of McClelland is difficult, since worker's compensation benefits by definition cover economic, rather than noneconomic damages, and McClelland never explains why verbal threshold should apply to such damages. In 2012, we published an article in Subrogator Magazine on this topic (the text of which appears below) titled "Subrogating New Jersey Workers' Compensatin in Motor Vehicle Accidents: The Interplay of the PIP and Verbal Threshold Schemes." In that article, we argued that McClelland stood for the proposition that where an injured worker would have been eligible for PIP benefits (but for the fact that worker's compensation is primary over PIP), N.J.S.A. 39:6A-12, which prevents admission into evidence of amounts paid or payable under PIP, prevents subrogation of worker's compensation claims.

However, the more recent case of Lambert v. Travelers Indem. Co. of Am., 447 N.J. Super. 61 (App. Div. 2016) clearly held that worker's compensation claims were not limited by N.J.S.A. 39:6A-12 and furthermore was emphatic that:

[N]othing in the legislative history of AICRA [the current PIP statute] suggests the Legislature meant to treat workers, who are injured in a work-related automobile accident, as if they were limited by AICRA's no-fault system.

In Star Insurance v. Magee, BER-L-7185-17 (Sup. Ct. Law Div. April 27, 2018), the Defendant moved for summary judgment dismissing Star's worker's compensation subrogation claim on the basis that Star could not prove that its insured's injuries met verbal threshold. Law Offices of Jan Meyer, representing Star, responded with several arguments:

• Plaintiff's claim was for economic damages and therefore was not subject to verbal threshold.
• To the extent McClelland holds that worker's compensation subrogation claims are subject to verbal threshold, the McClelland case was clear that the carrier could subrogate any claims it paid that would not be covered by PIP if worker's compensation wasn't available, a point further fleshed out by Patterson v. Adventure Trails, 364 N.J. Super. 444, 447 (Law Div. 2003). Since Star's insured was occupying a commercially-owned tractor-trailer, Star's insured was not entitled to PP benefits (PIP only covers occupants of "automobiles," see here), and therefore McClelland did not restrict Star's subrogation claim.
• It would be fundamentally unfair if the PIP scheme prevented subrogation by worker's compensation where the insured was not part of the PIP scheme since such insureds would be liable for PIP reimbursement where they were at fault for the accident.
• To the extent McClelland limits worker's compensation subrogation claims based on the verbal threshold statute, N.J.S.A. 39:6A-8, or based on N.J.S.A. 39:6A-12, its logic has been undermined by Lambert and other cases.

• "Here, even an informal reading of Plaintiff‘s Complaint shows that Plaintiff Star Insurance is seeking recovery of the cost of medical benefits and lost wages covered by Plaintiffs workers’compensation policy. Plaintiff does not need to provide evidence of an injury that falls within a certain category under 39:6A-8(a)."
• To the extent that some worker’ s compensation subrogation claims are subject to the verbal threshold under the statute, the case here is distinguishable. Here, the losses paid by Plaintiff were not compensable under the PIP benefits scheme ..."
• "Further, the Courts have found that the legislature did not intend for AICRA to limit recovery rights in the Worker's Compensation Act. Lambert v. Traveler’s Indem. Co. 447 N.J. Super. 61, 75 (App. Div. 2016)".

Subrogating New Jersey Worker’s Compensation In Motor Vehicle Accidents:

This article appeared in the Spring/Summer 2012 Issue of Subrogator Magazine, page 97.

At first blush, VT should have nothing to do with worker’s compensation subrogation, since worker’s compensation covers economic losses, and excludes pain and suffering. However, many carriers involved in asserting or defending against WC subrogation have been lead astray by a misunderstanding of Continental Ins. Co. v. McClelland, 288 N.J. Super. 185 (App.Div. 1996) and conclude that where VT applies, WC subrogation will only be possible where VT is met.

Continental says nothing of the sort. The court indeed spends a good deal of time establishing that VT applies to a work-related MVA, and states that despite the WC statute’s broad authority for subrogation, MVA tortfeasors should be no more liable for their torts by the happenstance that the injured party was in the course of work at the time of the accident. However, the court notes that “[t]here is merit to” the WC carrier’s argument that its loss was entirely economic and therefore not subject to VT.

In fact, Continental turns on a second statute, N.J.S.A. 39:6A-12, which prohibits recovery of amounts covered by NJ PIP. The court noted that if this were not a work-related accident, the injured party (who was occupying a private passenger vehicle) would have been entitled to PIP benefits (WC is primary over PIP per N.J.S.A. 39:6A-6, and therefore the WC carrier paid in this accident), and the cost of those benefits could not have been recovered from the tortfeasor. As noted previously in the case, the court believed the happenstance that WC was applicable should not increase the tortfeasor’s liability. Finally, the court noted that any losses not covered by PIP would be recoverable by the injured party pursuant to N.J.S.A. 39:6A-12, and that the compensation carrier would be subrogated to those recovery rights.

Thus, the true holding in Continental is not that VT applies to WC subrogation, but that the WC carrier may not recover for claims that could otherwise have been paid by PIP. In this regard it is worth noting that the majority of WC claims arising out of MVAs in NJ will not be subject to PIP, because commercial vehicles (other than private passenger vehicles not used as taxis and charter/route buses) do not require PIP. Second, although not explicitly provided by the statute, a WC carrier would likely have recovery rights for claims that would have been covered under PIP if a PIP carrier would have recovery rights under N.J.S.A. 39:6A-9.1 (i.e. where the tortfeasor was not required to, or did not, carry PIP).

Please note that the information included herein is solely the product of Law Offices of Jan Meyer and Associates, P.C., and does not constitute legal advice. For legal advice kindly contact our office.