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Lyon v. Barrett

Decided: May 18, 1982.


On certification to the Superior Court, Appellate Division.

For reversal and remandment -- Justices Pashman, Clifford, Schreiber, Handler, Pollock and O'Hern. For affirmance -- None. The opinion of the Court was delivered by Pollock, J.


Plaintiff Wendi Lee Lyon, a legal secretary, fell and sustained injuries while employed by Leo J. Barrett, P.A., a professional law corporation owned by defendant, Leo J. Barrett. The injury occurred in a building owned by Barrett individually and rented by him to his corporation and other tenants. Lyon received workers' compensation benefits from Leo J. Barrett, P.A. Thereafter, she instituted a third party negligence action pursuant to N.J.S.A. 34:15-40 against Barrett individually as landlord of the building. The issue is whether an employee who has recovered a workers' compensation award against a corporate employer may maintain such a negligence action for the same injuries against the individual who is the sole shareholder of the corporation.

The trial court granted Barrett's motion for summary judgment on the ground that Lyon's election to receive workers' compensation benefits barred her negligence action. The Appellate Division affirmed. We granted certification, 87 N.J. 417 (1981) (erroneously reported as "certification denied"), and we now reverse and remand the matter for trial.


On March 31, 1978, in the regular course of her employment, Lyon was injured in a fall while descending a stairway to a common basement storage area. She filed a workers' compensation claim against the corporation and received an award for temporary and permanent disability. Lyon then instituted a civil action against Barrett alleging that he negligently maintained his building. He denied negligence and asserted that Lyon could not recover damages from him because she had elected to receive workers' compensation benefits from his corporation. He argued that under N.J.S.A. 34:15-8 this election barred any further remedy against him and that he and the corporation should be considered as a "unitary employer-entity." He claimed that, as part of such an entity, he was not a "third

person" outside the employer-employee relationship against whom suit could be brought. See N.J.S.A. 34:15-40 (preserving the right of an injured worker to bring suit against any "third person . . . liable to the employee or his dependents for an injury or death" and providing that the employee's right to compensation benefits from the employer "shall not operate as a bar to the action").

In granting Barrett's motion for summary judgment, the trial court concluded that there was no difference between Barrett as an individual and Leo J. Barrett, P.A. Therefore, the court held that the statutory immunity from suit provided to the corporation should extend also to Barrett. In an unreported per curiam decision, the Appellate Division affirmed.

Both lower courts relied on Seltzer v. Isaacson, 147 N.J. Super. 308 (App.Div.1977), in which a dental assistant, after recovering a workers' compensation judgment against her employer, a one-man corporation, sued the dentist for assault and battery. The Appellate Division affirmed dismissal of her suit because it perceived the dentist and his corporation as comprising a "unitary employer-entity" against which the "employee should be limited to one recovery." Id. at 314.

In the present case, the Appellate Division declined to adopt the "dual capacity" doctrine, under which an employer may be independently liable for damages in tort as well as workers' compensation benefits. The doctrine permits double liability when the employer is sued for breach of a duty arising out of a separate relationship to the employee. For example, dual capacity liability may exist when an employer who is a physician commits malpractice while rendering treatment to an employee injured on the job or when the employer is a landowner who, by maintaining the work place in an unsafe condition, contributes to the happening of the accident. The thrust of the doctrine is to deny the shield of the immunity provisions of the workers' compensation statute to the landowner or treating physician who also happens to be the employer. Kelly, "Workmen's

Compensation and Employer Suability: The Dual Capacity Doctrine," 5 St. Mary's L.J. 818 (1974). Other jurisdictions have divided on whether to impose liability on an employer for omissions or acts committed in an alternate capacity. Compare Marcus v. Green, 13 Ill.App. 3d 699, 300 N.E. 2d 512 (1973) (imposing dual liability on an employer-landowner) with Billy v. Consolidated Machine Tool Corp., 51 N.Y. 2d 152, 159, 432 N.Y.S. 2d 879, 883, 412 N.E. 2d 934, 939 (1980) (rejecting argument that employer-landowner should be treated "as a dual legal personality, 'a sort of Dr. Jekyl and Mr. Hyde'"), and Delamotte v. Unit Cast Division of Midland Ross, 64 Ohio App. 2d 159, 411 N.E. 2d 814 (1978) (imposing dual liability on employer-treating physician) with Trotter v. Litton Systems, 370 So. 2d 244 (Miss.1979) (holding that a physician-employer cannot be ...

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