On appeal from the Superior Court of New Jersey, Law Division, Bergen County, L-260-98.
Before Judges Conley, Lisa and Winkelstein.
The opinion of the court was delivered by: Lisa, J.A.D.
NOT FOR PUBLICATION WITHOUT THE APPROVAL OF THE APPELLATE DIVISION
Argued September 22, 2004
This appeal requires determination of whether in a multi defendant case all sums paid in settlement to a plaintiff by solvent insurers are available to satisfy in full a workers' compensation lien where one of the tortfeasors who contributed to the settlement was represented by the New Jersey Property-Liability Insurance Guaranty Association (Association) because its insurer was insolvent. The aggregate non-Association contributions to the settlement exceeded the amount of the lien. In a published opinion, the Law Division found that plaintiff was entitled to a pro rata credit equal to the percentage of the settlement represented by the Association's contribution, thus reducing the compensation carrier's reimbursement by that percentage of its lien. Primus v. Alfred Sanzari Enters., 363 N.J. Super. 538, 543 (Law Div. 2003). We reverse. We hold that the applicable provisions of the New Jersey Property-Liability Insurance Guaranty Association Act (Act), N.J.S.A. 17:30A-1 to - 20, do not authorize such a credit, and the compensation carrier is entitled to full reimbursement of its lien from non-Association funds.
Plaintiff, Leon Primus, an employee of County Glass & Metal Installers, Inc., was injured while in the course of his employment. New Jersey Manufacturers Insurance Company (NJM) provided workers' compensation coverage for Primus' employer, and commenced payment of benefits for hospital and medical expenses and temporary and permanent disability. By the time of the third-party settlement, NJM had paid $186,638.94, and anticipated payment of an additional $79,872, for a total of $266,510.94.
Plaintiff's injury occurred on a building renovation construction site. A debris chute collapsed and fell on him. Joined by his wife suing per quod, plaintiff filed a third-party action against several potentially responsible parties, including the owner of the building and various other parties alleged to have manufactured, supplied, assembled, controlled, maintained or secured the debris chute and associated scaffolding.
The complaint, filed on plaintiff's behalf by Horn, Shechtman and Hirsch, P.C. (Horn Shechtman), utilized the fictitious name practice authorized by Rule 4:26-4 with respect to some defendants. The identity of one fictitiously-named defendant, ascertained as discovery progressed, was Ace Scaffolding, Inc. (Ace), which allegedly assembled the debris chute. Horn Shechtman moved to amend the complaint to specify Ace's true name. An issue arose as to whether Horn Shechtman could have, with the exercise of due diligence, ascertained Ace's identity before expiration of the statute of limitations.
Therefore, Horn Shechtman was exposed to a possible risk based on professional negligence to the extent of any fault on Ace's part. See Farrell v. Votator Div. of Chemetron Corp., 62 N.J. 111, 120-23 (1973); Stegmeier v. St. Elizabeth Hosp., 239 N.J. Super. 475, 484-85 (App. Div. 1990).
Plaintiff obtained new counsel. Horn Shechtman informed its professional liability carrier, Reliance Insurance Company (Reliance), of the potential claim. Reliance became insolvent and went into receivership, and the Association assumed its contractual obligations as required by the Act. N.J.S.A. 17:30A-8. Although Horn Shechtman had not been named as a defendant in the action, the Association's attorney participated in a settlement conference with the parties to the action. This occurred prior to a due diligence hearing regarding Horn Shechtman's identification of Ace. NJM was not invited to participate.
An overall settlement was agreed upon by which plaintiff would be paid $800,000, including $50,000 from the Association on Horn Shechtman's behalf. The remaining $750,000 would be paid by solvent insurers on behalf of the various defendants, including $25,000 on behalf of Ace. NJM sought reimbursement from the settlement proceeds of the full amount of its workers' compensation lien, based on total benefits of $266,510.94.
Plaintiff moved to limit reimbursement of the lien on a pro rata basis in proportion to the Association's contribution to the settlement, namely 1/16 ($50,000 / $800,000) or $16,656.93.*fn1 NJM was granted leave to intervene and opposed the motion. The judge granted plaintiff's motion and ordered that"the plaintiff will be permitted an offset or credit of $16,656.93, which represents 1/16th of the workers' compensation lien."*fn2 NJM appealed. We granted leave to the Association to intervene in the appeal.
Resolution of the issue in this case requires analysis of several provisions of the Act to determine whether the Act requires reduction of NJM's lien. The compensation lien is statutorily created and generally attaches to"any sum" recovered by the injured worker from a third-party, without regard to such equitable considerations as whether the worker has been fully compensated. N.J.S.A. 34:15-40; Frazier v. New Jersey Mfrs. Ins. Co., 142 N.J. 590, 597-98 (1995); Utica Mutual Ins. Co. v. Maran & Maran, 142 N.J. 609, 613 (1995); DeLane eX rel. DeLane v. City of Newark, 343 N.J. Super. 225, 234 (App. Div. 2001); Laureano v. New Jersey Transit Bus Operations, Inc., 220 N.J. Super. 295, 299 (App. Div. 1987), certif. denied, 110 N.J. 176 (1988). It is common that third-party settlements represent compromises, based on considerations of liability, coverage, expediency, certainty, and the like. Yet, N.J.S.A. 34:15-40 requires full reimbursement.
The underlying purpose of N.J.S.A. 34:15-40 is to prevent double recovery."The'double recovery' that the Legislature intended to prevent under section 40 is payment from two different sources for the same injury, and not payment in excess of the worker's'actual damages.'" Frazier, supra, 142 N.J. at 603. The compensation lien attaches to all sources of third party recovery, including the functional equivalent of an actual tortfeasor, such as Horn Shechtman here. Id. at 601-02; Utica Mutual, supra, 142 N.J. at 613. The compensation carrier is accorded a"dollar-for-dollar" lien. Calalpa v. Dae Ryung Co., 357 N.J. Super. 220, 228 (App. Div. 2003)."Hence, for every dollar of the employee's recovery from the ...