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Utica Mut. Ins. Co. v. Maran & Maran

December 4, 1995

UTICA MUTUAL INSURANCE COMPANY, PLAINTIFF-APPELLANT,
v.
MARAN & MARAN AND DWAYNE INGALA, DEFENDANTS-RESPONDENTS.



On certification to the Superior Court, Appellate Division.

The opinion of the Court was delivered by Garibaldi, J. Chief Justice Wilentz and Justices Handler, Pollock and Coleman join in Justice Garibaldi's opinion. Justices O'hern and Stein filed separate Concurring opinions.

The opinion of the court was delivered by: Garibaldi

(This syllabus is not part of the opinion of the Court. It has been prepared by the Office of the Clerk for the convenience of the reader. It has been neither reviewed nor approved by the Supreme Court. Please note that, in the interests of brevity, portions of any opinion may not have been summarized).

UTICA MUTUAL INSURANCE COMPANY V. MARAN ET ALS. (A-4-95)

(NOTE: This is a companion case to Frazier v. New Jersey Manufacturers Insurance Co., also decided today)

Argued September 11, 1995 -- Decided December 4, 1995

GARIBALDI, J., writing for the Court.

Utica Mutual Insurance Co. (Utica), a workers' compensation insurance carrier, sued Dwayne Ingala and his counsel, Maran & Maran, for refusing to honor Utica's lien against a legal malpractice recovery that Maran & Maran had obtained for Ingala. Ingala had sustained a work-related injury in 1985 while he was employed by Summit Graphics. While driving a truck, Ingala hit a pothole and his head struck the ceiling of the truck. Ingala claimed that his resulting injury was caused by the defective design of the driver's seat of the truck. Ingala retained an attorney to handle his workers' compensation claim, and as of 1991, received over $180,000 in workers' compensation benefits from Utica, Summit Graphic's workers' compensation insurance carrier.

Ingala retained another lawyer to handle his products liability action against the truck's seat manufacturer. That attorney failed to file suit within the statute of limitations. Maran & Maran was retained to sue Ingala's prior attorney for legal malpractice. The attorney eventually settled the matter for $585,000. Thereafter, Utica filed suit to obtain reimbursement pursuant to the "no double recovery" rule of N.J.S.A.34:15-40(section 40).

The parties files cross-motions for summary judgment. The trial court granted Maran & Maran's motion, ruling that Utica's lien did not attach to the legal malpractice recovery. The Appellate Division affirmed that ruling, relying on Wausau Insurance Co. v. Fuentes.

The Supreme Court granted certification.

HELD: A workers' compensation lien attaches to the proceeds of the legal malpractice action; this lien is imposed on a third-party recovery that is the functional equivalent of a recovery against the actual third-party tortfeasor, regardless of whether the worker has been fully compensated for his or her injuries. Moreover, Utica did not preclude itself from asserting a lien either by failing to sue the third party on its own or by failing to give earlier notice of the lien.

1. In Frazier v. New Jersey Manufacturers Ins. Co., also decided today, the Court set forth its reasons for holding that a section 40 lien attaches to legal malpractice recoveries. Because the express purpose of section 40 is to prevent recovery from different sources for the same injury, no justification exists for allowing an injured employee who receives a legal malpractice recovery to be in a better position than an injured employee who recovers directly from the tortfeasor. Therefore, a section 40 lien attaches to the legal malpractice recovery obtained by Ingala. (pp. 3-4)

2. Section 40 prevents the worker from retaining any workers' compensation benefits that have been supplemented by a recovery against the liable third party, even if the two combined would leave the worker less than fully compensated. That "no double recovery" rule should not be different when ...


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