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Danesi v. American Manufacturers Mutual Insurance Co.

Decided: March 30, 1983.

ROSE DANESI AND RINALDO DANESI, PLAINTIFFS-RESPONDENTS,
v.
AMERICAN MANUFACTURERS MUTUAL INSURANCE COMPANY, A CORPORATION, DEFENDANT-APPELLANT



On appeal from Superior Court of New Jersey, Chancery Division, Monmouth County.

Bischoff, J. H. Coleman and Gaulkin. The opinion of the court was delivered by J. H. Coleman, J.A.D.

Coleman

This appeal addresses the novel issue of whether an employer or its workers' compensation insurance carrier that has paid workers' compensation benefits pursuant to N.J.S.A. 34:15-8 et seq. is entitled to reimbursement from a recovery obtained from a third-party tort-feasor where the statutorily created lien has not been perfected pursuant to N.J.S.A. 34:15-40(d). Succinctly put, the question presented is whether the lien must be perfected before the right to reimbursement comes into existence. The lower court held that perfecting the lien is a prerequisite to the right of reimbursement from the employee. We disagree and reverse.

The facts pertinent to our decision are not disputed. On October 11, 1977 Rose Danesi (plaintiff) sustained personal injuries when she fell down some stairs while working for Michelle-Rena Fashions, Inc. On September 28, 1979 she was awarded $8,657.50 in workers' compensation benefits. On November 28, 1978 plaintiff and her husband instituted an action in the Law Division against Paul and Minnie Barrett as third-party tort-feasors for the injuries suffered by plaintiff on October 11, 1977. The same law firm represented plaintiff in both actions. Plaintiff's attorney advised defendant on June 18, 1980 that a third-party complaint had been filed and that he would keep defendant informed of developments. Plaintiff's attorney settled the third-party case for $15,000. In response to an inquiry from plaintiff's attorney on April 16, 1981, defendant advised that $5,025 was the net amount necessary to satisfy plaintiff's obligation

to reimburse her employer or its workers' compensation insurance carrier, the defendant herein. Notwithstanding the settlement of the third-party case, defendant has not been reimbursed. Defendant never filed a written lien pursuant to N.J.S.A. 34:15-40 before the settlement.

Subsequent to the settlement, plaintiffs filed the within action in the Chancery Division seeking a declaratory judgment that defendant is not entitled to reimbursement because it failed to file a written notice of lien pursuant to N.J.S.A. 34:15-40. The trial court entered summary judgment in favor of plaintiffs. He concluded that the right of reimbursement is barred unless the written notice of lien is filed with the third-party tortfeasor or his carrier by registered mail before payment is made to the employee. Defendant filed a notice of appeal from the summary judgment and denial of a motion for reconsideration held on December 18, 1981. That appeal bears Docket A-1968-81T3. Defendant also filed another notice of appeal from the summary judgment and an order dated January 4, 1982 denying a second motion for reconsideration. The latest appeal bears Docket A-2207-81T3. These appeals have been consolidated.

The Workers' Compensation Act, as originally enacted in 1911 (L. 1911, c. 95), made no provisions for the reimbursement of the employer or his worker's compensation insurance carrier out of the proceeds of any recovery from the third party responsible for the employee's injury or death. The third-party recovery could not be used to satisfy even the yet unpaid worker's compensation benefits previously awarded. United States Cas. Co. v. Hercules Powder Co., 4 N.J. 157, 163 (1950); Henry Steers, Inc. v. Turner, etc., Co., 104 N.J.L. 189, 193 (E. & A.1927). Thus prior to legislative amendments discussed hereinafter, an employee could retain both worker's compensation benefits and the proceeds recovered from a third-party action. Newark Paving Co. v. Klotz, 85 N.J.L. 432 (Sup.Ct.1914), aff'd 86 N.J.L. 690 (E. & A.1914).

Recognizing the harshness and inequity of the act, the Legislature amended the act in 1913 (L. 1913, c. 174, § 8) to provide

for three changes where there is a third-party recovery for the same injuries and losses covered by the worker's compensation award. These changes (1) proportionately extinguished the employer's obligation to pay further compensation upon payment by the third-party tortfeasor, (2) created a right of reimbursement for worker's compensation paid and (3) created a lien, when perfected, to secure reimbursement to the employer.

With minor changes in 1931 (L. 1931, c. 279, § 3); 1936 (L. 1936, c. 162, § 1); 1951 (L. 1951, c. 169, § 1) and in 1956 (L. 1956, c. 141, § 6), further refining the right to reimbursement, the controlling ...


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