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Continental Ins. Co. v. McClelland

March 1, 1996

CONTINENTAL INSURANCE COMPANY, PLAINTIFF-RESPONDENT,
v.
BLANCHE MCCLELLAND, DEFENDANT-APPELLANT.



On appeal from Superior Court of New Jersey, Law Division, Gloucester County.

Approved for Publication March 1, 1996.

Before Judges Villanueva and Kimmelman. The opinion of the court was delivered by VILLANUEVA, J.A.D.

The opinion of the court was delivered by: VILLANUEVA

VILLANUEVA, J.A.D.

Defendant Blanche McClelland appeals from a partial summary judgment striking her verbal threshold defenses in this statutory subrogation action brought by plaintiff Continental Insurance Company against her to recover workers' compensation payments of $4,079.28 made to and on behalf of Scott McLaughlin as a result of his work-related motor vehicle accident allegedly caused by defendant. The payments represented medical expenses of $1,950.88 and temporary disability benefits of $2,128.40. The trial court held that McLaughlin's election of the verbal threshold in his own insurance policy did not deprive plaintiff of its right to recover the amounts it had paid to him.

McLaughlin, who was operating his 1984 Subaru in the course of his employment when the accident occurred, did not pursue an action against defendant. His workers' compensation carrier, plaintiff herein, then filed suit against defendant to recoup the workers' compensation benefits it had paid to or on behalf of McLaughlin. After hearing cross-motions, the trial court entered an order granting partial summary judgment in favor of plaintiff and striking defendant's five separate defenses of the verbal threshold, N.J.S.A. 39:6A-8a. The court basically held that plaintiff could recoup the benefits it paid to McLaughlin without being barred by the verbal threshold. The remaining issues concerning liability and damages were resolved by entry of a consent judgment against defendant.

This case concerns the interplay between the workers' compensation lien statutes and the personal injury protection (PIP) statutes. Plaintiff claims that the issue is whether or not the trial court properly found that the lien section of the workers' compensation statutes, N.J.S.A. 34:15-40(f), is unaffected by the collateral source rule, N.J.S.A. 39:6A-6, the evidence bar of N.J.S.A. 39:6A-12, or the verbal threshold statute, N.J.S.A. 39:6A-8, in a situation where workers' compensation payments are made as a result of an automobile accident. We believe that the sole issue is whether McLaughlin's election of the verbal threshold bars his employer's claim for reimbursement pursuant to N.J.S.A. 34:15-40.

N.J.S.A. 39:6A-8a authorizes certain defendants to assert a verbal threshold defense. In Beaugard v. Johnson, 281 N.J. Super. 162, 167-689, 656 A.2d 1282 (App. Div. 1995), we noted that the test for applicability was two-fold. Initially, it is necessary to examine the status of the defendant and determine whether he or she is entitled under N.J.S.A. 39:6A-4 to receive no-fault PIP benefits. Id. at 167; see also Loftus-Smith v. Henry, N.J. Super. (App. Div. 1996) (slip op. at 7). Next, it must be established that the injured person is subject to the verbal threshold and either is required to maintain PIP coverage or has a right to receive PIP benefits. Beaugard v. Johnson, supra, 281 N.J. Super. at 168. Here, McLaughlin is subject to the verbal threshold by his selection on his personal automobile insurance policy. Because of the ownership of the automobile, McLaughlin is required to maintain PIP coverage. Thus, the second prong of the test is clearly met. Therefore, our Discussion will address only the first prong.

Plaintiff seeks to bring its action against defendant pursuant to N.J.S.A. 34:15-40 which provides, in pertinent part, as follows:

Where a third person is liable to the employee or his dependents for an injury or death, the existence of a right of compensation from the employer or insurance carrier under this statute shall not operate as a bar to the action of the employee or his dependents, nor be regarded as establishing a measure of damage therein. In the event that the employee or his dependents shall recover and be paid from the said third person or his insurance carrier, any sum in release or in judgment on account of his or its liability to the injured employee or his dependents, the liability of the employer under this statute thereupon shall be only such as is hereinafter in this section provided.

(f) When an injured employee or his dependents fail within 1 year of the accident to either effect a settlement with the third person or his insurance carrier or institute proceedings for recovery of damages for his injuries and loss against the third person, the employer or his insurance carrier, 10 days after a written demand on the injured employee or his dependents, can either effect a settlement with the third person or his insurance carrier or institute proceedings against the third person for the recovery of damages for the injuries and loss sustained by such injured employee or his dependents and any settlement made with the third person or his insurance carrier or proceedings had and taken by such employer or his insurance carrier against such third person, and such right of action shall be only for such right of action that the injured employee or his dependents would have had against the third person and shall constitute a bar to any further claim or action by the injured employee or his dependents against the third person. . . .

[N.J.S.A. 34:15-40 (emphasis added).]

This statute reserves to the injured employee a cause of action against the third party and creates a right of reimbursement in the employer or its insurance carrier. McMullen v. Maryland Casualty Co., 127 N.J. Super. 231, 235, 317 A.2d 75 (App. Div. 1974), aff'd sub nom. McMullen v. Conforti & Eisele Inc., 67 N.J. 416, 341 A.2d 334 (1975); Arnone v. Murphy, 153 N.J. Super. 584, 585, 380 A.2d 734 (Law Div. 1977). This right is commonly referred to as "statutory subrogation."

Whether or not an injured plaintiff who is subject to the verbal threshold by his own automobile insurance policy is able to recover workers' compensation benefits is immaterial to an action against a defendant tortfeasor. Defendant's liability is not affected by the fortuitous circumstance that plaintiff was entitled to workers' compensation benefits. The compensation carrier's rights rise no higher than the employee's rights to which it is subrogated. ...


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