The PEJIF recovers very large sums of money each year on account of double recoveries arising from workers’ compensation accidents. What is a double recovery? This happens when an injured worker recovers benefits in a workers’ compensation case and also recovers an award in a civil litigation arising from the same accident. Consider this hypothetical: a police officer is in the process of responding to a call when a driver runs a stop sign and strikes the officer’s car. The officer is seriously injured and ends up losing six months of time from work, having extensive medical care and low back surgery, and ultimately gets an award of permanent partial disability.
In this scenario the officer has two potential cases. One is the workers’ compensation claim against the member municipality, and the other is a potential civil suit against the negligent driver who caused the accident. Let’s further assume that the PEJIF pays $300,000 in workers’ compensation benefits comprising compensation for lost time from work, medical expenses, including the bills from the surgeon, hospital, anesthesiologist, physical therapy and medications, plus an award of 40% permanent partial disability or $140,640.
In the civil case filed by the officer, let’s assume further that the carrier for the negligent driver settles with the officer for $500,000. Is there a double recovery here? Yes there is a double recovery. N.J.S.A. 34:15-40 provides that the employer gets reimbursed in such double recovery situations. Here the double recovery exists to the extent of $300,000 – which is the amount paid in workers’ compensation. The next issue is how does the PEJIF actually get back money from the third party defendant and how much money does the PEJIF receive.
To enforce its reimbursement rights, the PEJIF follows very clear protocols. As soon as the PEJIF becomes aware of a civil suit arising from a worker’s compensation injury and potential double recovery, the third party administrator springs into action and notifies the defendant carrier for the negligent third party of the PEJIF’s “lien rights.” This is a legal term referring to the PEJIF’s financial interest in the potential third party recovery. The defendant carrier is advised not to disburse any money from the third party settlement until the defendant carrier resolves the PEJIF’s workers’ compensation lien. The adjuster usually writes several letters to the lawyer in the third party case and the defendant carrier, keeping all interested parties posted on how much money has been paid in the workers’ compensation case. The TPA or its recovery team is in constant contact with the third party lawyer and the defendant’s carrier.
How much does the PEJIF get back in our above scenario? In this case the PEJIF will get back $200,000 of the $300,000 it paid in workers’ compensation. That’s a very substantial sum. The employer generally gets back two thirds of its payments if the third party recovery is higher than the total workers’ compensation costs. The other one third represents the legal fee that the injured worker must pay to his or her attorney. Usually the legal fee in the third party case is one third, but it can be lower. In this hypothetical scenario, the third party recovery of $500,000 is higher than the total workers’ compensation costs of $300,000, so the PEJIF is getting back $200,000 if the fee was one third in the civil case. There is also a small cost allocation of $750 that the employer must pay toward litigation costs in the civil case, such as filing fees and deposition costs.
The legal philosophy is that an employee should not receive a double recovery when he or she has both a workers’ compensation claim and an additional civil claim against a third party who caused the work injury. The least percentage the employer can get back is two thirds in the above example. But if the third party lawyer only charged the police officer 25% for a legal fee in the civil case, then the PEJIF would get back 75% of its workers’ compensation costs or $225,000 in our hypothetical civil recovery.
The process of recovering funds from civil recoveries requires a good deal of work right from the start. The PEJIF, the member municipality, the third party administrator and defense counsel must all cooperate when a significant accident occurs in identifying the true cause of the accident. An investigation must be done of the cause. If the cause of the accident is a negligent co-employee, there will be no third party action because an employee cannot sue a co-employee in civil court. Nor can the injured worker sue his or her employer because the exclusive remedy is a workers’ compensation claim unless intentional harm is involved. But the employee is free to sue a third party who caused the accident. For example, let’s assume a slip and fall injury happens at work. The investigation shows that there was negligence caused by a contractor who was working in the municipal building. The third party administrator may write to the injured worker’s lawyer and ask if they have considered filing a civil action. Then follow-up steps are taken by the third party administrator to make sure a lawsuit gets filed and that proper parties are put on notice of the PEJIF’s lien rights.
One situation that occurs from time to time is the refusal of the injured worker to file a civil suit. For a variety of reasons, some injured workers may choose not to pursue a perfectly valid third party suit arising from a workers’ compensation injury. Is the PEJIF then out of luck? No, the PEJIF still has legal rights to bring its own suit or settle a third party case on its own, if the employee refuses to file his or her own case against a negligent third party. There are timing rules that must be followed. The employer must allow the employee one year from the accident date to decide whether to file the civil suit. If no suit has been filed within one year, then the PEJIF must send the employee a 10-day letter which advises that if no suit is commenced within 10 days, the employer will sue the negligent third party in the name of the injured employee or negotiate a settlement. If after 10 days the employee still will not bring suit, then the PEJIF has a green light to file a lawsuit or negotiate settlement. In situations like this the PEJIF can recover 100% of its workers’ compensation payments because there is no attorney fee for the injured worker. For example, if the PEJIF has paid $30,000 in workers’ compensation benefits and then recovers $30,000 by negotiating with the liability carrier for the third party defendant, then the PEJIF gets back all $30,000!
The guiding principle to remember is that New Jersey law abhors double recoveries. It therefore makes good sense for employers, third party administrators and defense counsel to work together to identify whether a third party is responsible for every accident which leads to the payment of workers’ compensation benefits.
John H. Geaney, Esq.
Capehart Scatchard, P.A.