On appeal from the Division of Workers' Compensation, Department of Labor and Industry.
Morton I. Greenberg, O'Brien and Gaynor. The opinion of the court was delivered by Morton I. Greenberg, P.J.A.D.
The matter comes on before the court on appeal from an order of the Division of Workers' Compensation in a proceeding determining the payment due to respondent employer from a third-party recovery made by petitioner, respondent's totally and permanently disabled employee. Petitioner concedes that the value of the third-party recovery is almost certain to exceed respondent's potential liability under a workers' compensation award. Thus under N.J.S.A. 34:15-40(b) respondent is entitled to reimbursement for the medical and compensation payments made to or on behalf of petitioner and extinguishment of future liability for payments. We consider whether the attorney's fee allowed petitioner under that section should take into account the possibility that petitioner may receive an extension of benefits under N.J.S.A. 34:15-12(b) beyond the ordinary period of 450 weeks for the payment of compensation to a totally and permanently disabled employee. We also deal with the calculation of the attorney's fee due petitioner by reason of respondent's being relieved from paying petitioner's future medical expenses.
The background of this case is rather complicated. As the result of an injury which petitioner Juan Rivera suffered on
November 20, 1975 while employed by respondent*fn1 he filed a workers' compensation claim petition against it resulting in an initial determination on July 17, 1978 that petitioner had a 90% permanent partial disability. This award entitled petitioner to weekly installment payments of $40 for 495 weeks, a total of $19,800. Subsequently petitioner instituted a third-party civil negligence suit for the same injuries against H.L. Lazar Co. which in June 1981 was settled by Lazar making an immediate payment of $250,000 to petitioner and agreeing to make payments of $70,000 annually for petitioner's life. Lazar guaranteed to make the annual payments for 20 years in the event of petitioner's death within that period. Petitioner places the value of this settlement at over $1,000,000.
Prior to the settlement of the third-party action petitioner filed a petition for a reopening of the compensation proceedings, an application which was pending when the third-party action was settled. Following the Lazar settlement respondent filed a motion with the Division of Workers' Compensation seeking an order compelling petitioner to reimburse it for the compensation payments it had made. Respondent further sought to extinguish its obligation to make any future payments. A hearing was held on respondent's motion on March 29, 1982. Respondent represented that it had paid to or on behalf of petitioner $5,500 temporary disability, $9,880 permanent disability and $20,720.25 medical expenses, a total of $36,100.25. It calculated that the unpaid balance due on the compensation judgment was $9,920, the difference between the $19,800 permanent disability award and the $9,880 paid. Respondent therefore contended it should be reimbursed for or be released from paying $46,020.25, the sum of payments paid and its liability outstanding. Respondent conceded, however, that petitioner was entitled to a credit for an attorney's fee of one-third of the $46,020.25, $15,340.08, pursuant to N.J.S.A.
34:15-40. Respondent also agreed that petitioner should be credited with the $200 in expenses allowable in that section. After these credits were allowed petitioner, respondent contended petitioner owed it $20,560.17. The judge of compensation agreed with respondent's contentions and consequently on April 5, 1982 he entered an order directing petitioner to repay to respondent $20,560.17 as reimbursement pursuant to N.J.S.A. 34:15-40. The order further stated that respondent was discharged from any further liability under the order of July 17, 1978. The order of April 5, 1982 made no mention of petitioner's future medical expenses.
Petitioner moved for leave to appeal from the order of April 5, 1982 and we granted this motion on May 27, 1982. While this appeal was pending a hearing was held on petitioner's application to reopen the compensation proceedings. The judge of compensation found petitioner was totally and permanently disabled and thus on August 12, 1982 he entered an order awarding petitioner $100 per week for 450 weeks, a total of $45,000. Against this judgment respondent was entitled to a credit of $19,800, the amount awarded petitioner under the judgment of July 17, 1978. Accordingly the award for permanent disability was increased by $25,200. Obviously the increase in the compensation award required a change in the calculations underlying the order of April 5, 1982 for a larger liability on which the attorney's fee was calculated had been extinguished.
Following entry of the order of August 12, 1982 petitioner made a motion for summary disposition of his appeal which resulted in an order of this court on October 20, 1982 remanding the matter to the Division of Workers' Compensation for recalculation of the amount due respondent by reason of petitioner's settlement with Lazar. We directed the division to "give due regard to the adjudication that petitioner is now 100% totally and permanently disabled as well as the need for future medical expenses." [197 NJSuper Page 634] The matter came on before the judge of compensation on November 29, 1982. No testimony was taken at that time. Rather the parties simply argued the case. Respondent's position was consistent with that it had taken on March 29, 1982. It contended that the attorney's fee allowed under N.J.S.A. 34:15-40 should be calculated on the basis of the total amount respondent had already paid for temporary and permanent disability and medical expenses together with the amount of permanent disability it had been but was no longer obligated to pay on the compensation awards. In a letter to the judge respondent set forth its figures in detail. It had already expended $36,100.25 for permanent disability, temporary disability and medical expenses, a figure unchanged from that stated on March 29, 1982. Inasmuch as the total award for permanent disability was $45,000, the balance due on permanent disability was $35,120, that sum being $45,000 less the $9,880 respondent had paid for permanent disability. Consequently the amount subject to release and reimbursement was the sum of $36,100.25 and $35,120 or $71,220.25. Respondent, by applying the limitations of R. 1:21-7 to reduce the maximum allowable 33 1/3% fee under N.J.S.A. 34:15-40(e), calculated the attorney's fee as one-third of $50,000 and one-fourth of $21,220.25. This resulted in a fee of $21,972.73, an amount enhanced by $200 for expenses allowable under N.J.S.A. 34:15-40 to $22,172.73.*fn2 Inasmuch as respondent had already expended $36,100.25 to or on behalf of petitioner respondent conceived itself entitled to reimbursement of $13,927.52. Thus the practical consequence of the reopening proceeding before the Division of Workers' Compensation was, in respondent's view, to reduce the refund due it from petitioner by $6,632.65, the difference between the amounts set forth in the order of April 5, 1982 and its new figures. Respondent also conceded, however,
that it would have an obligation for future medical costs, an item not mentioned in the ...