Greene v. AIG Casualty Company, A-6278-11T4; Appellate Division; opinion by Accurso, J.A.D.; decided and approved for publication October 16, 2013. Before Judges Grall, Koblitz and Accurso. On appeal from the Department of Labor, Division of Workers’ Compensation, Claim Petition No. 2009-24085. DDS No. 39-2-1652 [15 pp.]

The question presented by this appeal is whether respondent AIG Casualty Company, which paid workers’ compensation benefits to petitioner, is entitled to a lien against her settlement with a third-party tortfeasor pursuant to § 40 of the Workers’ Compensation Act, N.J.S.A. 34:15-40, even though her injury was ultimately noncompensable. The workers’ compensation judge determined that § 40 is inapplicable to a claim deemed not to be compensable.

Petitioner was employed by AIG as an accountant analyst. She slipped in the lobby of the building where she worked, on a floor wet with rain, and sustained an injury to her knee. Petitioner immediately reported the accident to AIG. AIG did not own the building but only leased a portion of the premises. It initially denied the claim and advised petitioner to submit any bills to her health insurance carrier. Nevertheless, and for reasons unclear on the record, within days of that letter AIG authorized treatment without prejudice pursuant to N.J.S.A. 34:15-15 (§ 15).

The subrogation agent for AIG’s workers’ compensation carrier wrote to petitioner asserting a lien against any financial recovery she might obtain from any third party. Petitioner filed a claim petition in the Division of Workers’ Compensation against AIG and a third-party tort action. AIG filed an answer to the claim petition. AIG continued to pay medical and temporary disability benefits to petitioner pursuant to § 15.

AIG subsequently filed an amended answer denying that petitioner’s injury had occurred in the course of her employment and a motion to dismiss petitioner’s claim petition. Petitioner opposed the motion and filed two motions of her own, including a motion to bar any claim by AIG under § 40.

In the motion made pursuant to § 40, counsel expressed petitioner’s willingness to concede that the claim was not compensable in exchange for a waiver of AIG’s statutory subrogation rights as against her third-party settlement. AIG opposed the motion. AIG asserted that it provided petitioner medical treatment and disability payments without prejudice pursuant to the express terms of § 15, and thus was entitled to its lien pursuant to § 40. Counsel contended that “[n]owhere does it state in [Section 40] that it is applicable only when there is a compensable lien.” AIG claimed that petitioner’s construction of the statute would allow her a double recovery not permitted under workers’ compensation laws.

The workers’ compensation judge granted petitioner’s motion.

Held: Respondent AIG Casualty Company, which paid workers’ compensation benefits to petitioner, is entitled to a lien against her settlement with a third-party tortfeasor pursuant to § 40 of the Workers’ Compensation Act, even though her injury was ultimately noncompensable.

The clear intent of § 40 is to prevent an injured employee from recovering and retaining workers’ compensation payments, while at the same time recovering and retaining the full damages resulting from a third-party tort suit.

Contrary to petitioner’s argument, nothing in either § 15 or § 40 conditions reimbursement of the claim from a third-party settlement on whether the benefits the employer paid were owed in the first place. Section 15 expressly provides that any payments the employer makes are without prejudice to a defense of noncompensability, and § 40b allows the employer reimbursement from the third-party recovery if the sum recovered by the employee is “equivalent to or greater than the liability of the employer.”

Here, as petitioner concedes that AIG has no liability under the premises rule, the sum she recovered in settlement of her third-party claim must be greater than AIG’s liability, because the injury was noncompensable and AIG’s liability therefore nonexistent. Accordingly, AIG is entitled to recover from petitioner’s third-party settlement all of its payments to her, less her expenses of suit and attorney fees in accordance with § 40.

Allowing third-party reimbursement under § 40 without regard to compensability encourages the employer to make prompt voluntary payments, thereby affording the employee needed funds for medical treatment and the replacement of lost wages. The act encourages the same result through the express assurance of § 15 that the voluntary payment of benefits will not constitute an admission of liability, as well as through the act’s attorney fee provision, which allows an employer to reduce its exposure to payment of the petitioner’s fees by making a timely good-faith tender of compensation.

In addition, permitting AIG a lien against petitioner’s settlement with a third-party tortfeasor pursuant to § 40, even though her injury was ultimately noncompensable, furthers the legislative policy of preventing double recoveries.

Petitioner and the workers’ compensation judge suggest that petitioner has been penalized by AIG’s payment of benefits under § 15, as she would otherwise have had her medical expenses paid by her health insurer. But that ignores the effect of the collateral-source rule, which would require petitioner to disclose to the court any amounts she received from her health insurer and they would have been deducted from any tort judgment. Thus, there is no disadvantage to petitioner in allowing a § 40 lien against her third-party recovery regardless of the compensability of her claim. Because the collateral-source rule expressly excludes workers’ compensation benefits, however, not allowing a lien in this circumstance would undoubtedly result in a double recovery to petitioner.

Section 40 and the collateral-source statute plainly require that a third-party tortfeasor be held to the full extent of its liability for a workplace injury, that the employer or compensation carrier be repaid for benefits paid to the injured worker pursuant to the act without regard to the compensability of the claim, and that the employee not obtain a double recovery.

The appellate panel reverses, finding AIG is entitled to its lien.

For appellant — John H. Geaney (Capehart & Scatchard; Geaney and Ian G. Zolty on the briefs). For respondent — John J. Jasieniecki (Green, Jasieniecki & Riordan).