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Breslin v. Liberty Mutual Insurance Co.

October 2, 1973


Gelman, J.s.c.


[125 NJSuper Page 323] These motions in two separate cases evolve from identical fact situations and present common questions of law. In each instance a New Jersey resident, employed in New York, was injured in an automobile accident in New Jersey. Disability benefits were paid to the employees by their respective New York employers' insurance carriers. Actions were commenced in New Jersey by the employees against third parties for injuries received in the accidents and resulted in the recovery of amounts in excess of the disability benefits received by the employees from the carriers, plus attorneys' fees and costs (computed on the whole sum recovered).*fn1 The carriers in these actions assert subrogation

rights under New York law to the full extent of the benefits paid, without allowance for costs or attorneys' fees incurred by the employees in effecting a recovery.

On their part the employees assert that (1) the enforcement of the New York statutory subrogation claims should be denied in their entirety because the claims conflict with the statutory law and public policy of New Jersey, or (2) at the very least and for similar reasons, the amounts claimed by the carriers are subject to an offset for the pro rata share of costs and attorneys' fees incurred in effecting the recovery against which the right of subrogation is being claimed.

The New York disability benefits law provides for full subrogation of the total amount of benefits paid to an employee in any recovery by the employee against a third party, so long as the amount recovered, after deducting attorneys' fees and expenses, exceeds the amount of benefits paid. Workmen's Compensation Law, § 227, McKinney's Consol. Laws, c. 67. As interpreted by the New York courts, the employee's attorney does not have a lien against and is not entitled to a fee for services rendered in effecting the recovery. See, e.g., Cianciosi v. Merchant's Mut. Ins. Co., 61 Misc. 2d 867, 307 N.Y.S. 2d 136 (Sup. Ct. 1970). The New York law is the same where third-party recovery has been effected after workmen's compensation benefits have been paid. Workmen's Compensation Law, § 29; Kussack v. Ring Const. Corp., 1 A.D. 2d 634, 153 N.Y.S. 2d 646 (Sup. Ct. App. Div. 1956), aff'd 4 N.Y. 2d 1011, 177 N.Y.S. 2d 522, 152 N.E. 2d 540 (Ct. App. 1958); Privetera v. Hillcrest Homes, Inc., 29 N.J. Super. 591 (Law Div. 1954).

Under the comparable New Jersey statute a disability benefits carrier is not accorded any right of subrogation

against a third-party recovery, see N.J.S.A. 43:21-25 et seq., and in the case of workmen's compensation benefits the carrier's right of subrogation is subject to payment of an attorney's fee on the amount recovered not to exceed 33 1/3% plus expenses not to exceed $300. See N.J.S.A. 34:15-40(b), (e).

The fact that the New Jersey statutory disability benefits scheme does not create a right of subrogation with respect to claims against third parties does not compel New Jersey courts to deny the carriers' statutory rights under New York law. Viewed as a choice-of-law question, New York's disability benefits law as enunciated in § 227 must govern the existence vel non of the right of subrogation. The place of employment here was New York and the benefits were paid to the injured employees by reason of their New York employment and pursuant to the statutory scheme of that state. While choice of law in this situation is not controlled by the application of mechanistic formulae as such, it is evident that fundamental fairness as well as the need for certainty of result commits our courts to look to the laws of the state pursuant to which the benefits were paid to determine questions affecting the essential rights of the employers, co-employees, as well as insurance carriers. See Stacy v. Greenberg, 9 N.J. 390; Privetera v. Hillcrest Homes, Inc., supra; but see, Wilson v. Faull, 27 N.J. 105 (1958).*fn2

"Forum shopping" is obviously not in issue here. These actions are common, garden-variety negligence suits brought by New Jersey residents in New Jersey courts and arising out of New Jersey accidents. Likewise, the agreements for the retention of the respective attorneys to prosecute the third-party claims were concluded in this State.

Thus, with respect to all issues affecting the employees' rights of action, whether we apply mechanical choice-of-law rules or the more enlightened contacts test, New Jersey law applies and determines the result.

A long line of New Jersey judicial and statutory precedent has established the priority and status of the attorney's lien in this State. See, e.g. State v. Otis Elevator Co., 12 N.J. 1, 5 (1953); Visconti v. M.E.M. Machinery Corp., 7 N.J. Super. 271, 274-275 (App. Div. 1950); Lehigh & N.E.R. Co. v. Finnerty, 61 F. 2d 289 (3 Cir. 1932); N.J.S.A. 2A:13-5. It is likewise established in this State that one who derives a benefit from the services rendered by an attorney, whether the party involved retained the attorney or not, ought in good conscience and as a matter of fundamental fairness bear at least a pro rata share of the costs of those ...

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