For affirmance -- Chief Justice Hughes, Justices Mountain, Sullivan, Pashman, Schreiber and Judges Conford and Kolovsky. For reversal -- None. The opinion of the court was delivered by Conford, P.J.A.D., Temporarily Assigned.
We are asked on this appeal to alter the construction of the employer-subrogation provisions of the Workmen's Compensation Act (N.J.S.A. 34:15-40) from that consistently understood and practically applied in this State by those concerned therewith over the years.
The act provides, expressly and without qualification, that the employer or his compensation carrier is subrogated to the injured employee's cause of action in tort against the third-party tortfeasor to the extent of compensation payments made by the employer or its carrier. We are asked now to declare, for the first time since the reimbursement section was added to the act in 1913 (L. 1913, c. 174, Sec. 8), that the third-party defendant to a tort action may have his liability reduced pro tanto by any payments in compensation made by the employer if the latter's negligence contributed to the employee's injury -- thereby extinguishing the employer's statutory right of reimbursement from the third-party recovery in that instance. For reasons to be stated, we decline to adjudicate such a change in the settled law.
The three plaintiffs here involved were employees of Metem Corporation and were injured in an industrial accident. Workmen's compensation benefits were paid by the employer's insurance carrier, Sentry Insurance Co. Third-party tort actions were instituted by plaintiffs against defendants-third party plaintiffs Elox Division of Colt Industries and General Electric Company. The latter filed third-party complaints against Metem and Sentry asserting the claim for relief summarized above. On motion by Sentry, Judge Gascoyne, sitting in the Law Division, dismissed the third-party complaints as failing to state a valid claim for relief. The Appellate Division denied a motion for leave to appeal, but we granted such a motion, 68 N.J. 498 (1975), and now affirm.
Appellants invoke the precedents of several other jurisdictions which take the minority view on this issue -- that a
right of subrogation is withheld from a negligent employer in such circumstances in order to vindicate the equitable principle that a wrongdoer shall not profit from his wrong. Brown v. Southern Ry., 204 N.C. 668, 169 S.E. 419 (Sup. Ct. 1933); Maio v. Fahs, 339 Pa. 180, 14 A.2d 105 (Sup. Ct. 1940); Witt v. Jackson, 57 Cal. 2d 57, 17 Cal. Rptr. 369, 366 P. 2d 641 (Sup. Ct. 1961). Although there are variations, the general mode of implementation of the principle is to reduce the judgment against the third party pro tanto by the amount of the employer's compensation liability. The cited authorities and those which represent the contrary majority view are collected and discussed in the comprehensive opinion of Judge Gascoyne, with which we are in general agreement. 133 N.J. Super. 297 (1975).
Our affirmance is based on two broad grounds: (a) the intention of the legislation in this State is too clearly expressed in the statute itself to permit the judicial construction sought by appellants; (b) the policy encompassed by the statute is not so plainly offensive to principles of justice, if offensive at all, as to warrant this court straining for a result contrary to the clear expression in the statutory language.
Before specifying the subrogation provisions, the statute recites that in the event of the payment of any sum to the employee by the third person on account of its liability to the employee " the liability of the employer under this statute thereupon shall be only such as is hereinafter in this section provided." (emphasis added). N.J.S.A. 34:15-40. "Liability" of course includes the measure of damages as well as the substantive fact of liability. If the sum recovered from the third person equals or exceeds the compensation liability*fn1 "the employer * * * shall be released from such liability and shall be entitled to be reimbursed" for compensation payments made. (emphasis added). Id.
(b). If the sum recovered from the third person is less than the compensation liability the employer "shall be liable for the difference" and "shall be entitled to be reimbursed * * * for so much of the medical expenses incurred and compensation payments theretofore paid" to the employee as exceeds the amount of the difference aforesaid. Id. (c).
The statute further provides, in effect, that if, prior to any payment to the employee by the third person, the employer notifies the third person that compensation has been applied for, it shall "become the duty" of the third person before making any payment to inquire of the employer as to compensation theretofore paid to the employee. Thereafter, out of any payment about to be made by the third person to the employee, the employer "shall be entitled to receive" from the third person so much thereof as the employer is entitled to receive under the aforestated reimbursement provisions of the act, which sums are deductible from the amounts due the injured employee. Id. (d).
If an injured employee fails for a year after the accident to institute an action or settle a claim against the third person, the employer, after 10 days notice to the employee, may institute such an action in the name of the employee or make a settlement with the third person "for such right of action that the * * * employee * * * would have had against the third person". The proceeds are allocable between employee and ...