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Liberty Mutual Insurance Co. v. Cipriano


December 10, 2008


On appeal from the Superior Court of New Jersey, Law Division, Passaic County, Docket No. L-1574-07.

Per curiam.


Argued October 7, 2008

Before Judges Yannotti and LeWinn.

Dennis A. Cipriano and Brenda Brown appeal from an order entered by the trial court on October 1, 2007, which declared that Liberty Mutual Insurance Company (Liberty Mutual) has a workers' compensation lien on certain monies Brown obtained in a personal injury law suit. For the reasons that follow, we affirm.

The pertinent factual background may be summarized as follows.

On January 16, 2004, in the course of her employment with the corporate offices of Linens 'N Things in Clifton, New Jersey, Brown was injured when she slipped and fell on the offices' premises. Brown informed her supervisor of the incident. Subsequently, Liberty Mutual, the workers' compensation insurer of Linens 'N Things, paid benefits to and on behalf of Brown totaling $68,278.18. Brown claimed that she never filed an application for workers' compensation benefits.

Cipriano thereafter represented Brown in a personal injury lawsuit against the owners of the premises. In her deposition, Brown testified that her employer at the time of the accident was Linens 'N Things. The personal injury lawsuit settled in early 2007 for $120,000.

Liberty Mutual informed Cipriano that it would seek a lien upon the settlement proceeds pursuant to N.J.S.A. 34:15-40, based upon the $68,278.18 it previously paid out. By letter dated February 1, 2007, Cipriano informed Liberty Mutual that he had "ascertained that Ms. Brown was employed by LNT Services, Inc., a Delaware corporation, and was not employed by your customer or any entity insured by Liberty Mutual. LNT Services, Inc., was not insured by Liberty Mutual." Therefore, Cipriano stated, "Liberty Mutual is not entitled, [to] and shall not be paid, any amount out of the settlement proceeds due to Ms. Brown."

Liberty Mutual thereupon filed suit on April 9, 2007, to establish its reimbursement lien. On April 30, 2007, Liberty Mutual filed a motion to compel reimbursement of its lien, in the amount of $44,768.79, representing two-thirds of the total amount of benefits paid, less $750.*fn1 On May 25, 2007, the trial court entered an order compelling Cipriano and Brown to "turn over to Liberty Mutual . . . the sum of $44,313.60*fn2 from the third party recovery obtained in this case, within 21 days . . . , in full satisfaction of Liberty Mutual['s] . . . lien arising out of the workers' compensation benefits it paid to and on behalf of . . . Brenda Brown . . . ."

On May 30, 2007, Cipriano filed a "cross-motion" seeking authorization to disburse the $120,000 in settlement proceeds, which he held in his attorney trust account. In support of this application, Brown certified that when she was deposed during the personal injury litigation, she "did not realize that [her] employer was LNT Services, Inc., until . . . [she] was asked by [her] attorney to provide copies of [her] pay stubs." On June 8, 2007, the trial court entered an order denying the cross-motion as untimely and improper.

On July 20, 2007, Cipriano filed a motion to vacate the two prior orders of the court and to authorize disbursement of the settlement proceeds. At oral argument, the trial court ordered counsel for Liberty Mutual to "submit a letter that will become part of the record as to what the relationship is between LNT Services, Inc., and Linens-N-Things." On September 16, 2007, counsel submitted a "flow chart showing the current corporate structure for Linens-N-Things." Based on the flow chart, counsel advised the court that "'LNT Services, Inc.' is the corporation for the home office and distribution centers for whom the injured employee worked."

On October 1, 2007, the trial court entered an order vacating its previous two orders and declaring that Liberty Mutual had a lien against the $120,000 in settlement proceeds pursuant to its complaint filed in April. The order barred disbursement of those settlement proceeds pending resolution of the lien.

On appeal, Cipriano and Brown contend that Liberty Mutual has no lien "because a workers' compensation lien must arise from an employer-employee relationship, and Brown had no such relationship with Linens 'N Things." They further argue that "[v]oluntary payments erroneously made cannot be recovered without evidence of fraud on the part of the recipient." Having reviewed these contentions in light of the record and the applicable law, we find them to be without merit and affirm.

Where, as here, an employee receives workers' compensation benefits for a work-related injury, and also recovers monetary damages for that injury in a third-party lawsuit, the workers' compensation insurance carrier has a statutory right to reimbursement. N.J.S.A. 34:15-40(b) entitles the carrier to repayment "of medical expenses incurred and compensation payments theretofore paid to the injured employee . . . less [the] employee's expenses of suit and attorney's fee . . . ." The statute further provides that the carrier is entitled to receive repayment prior to disbursement of the proceeds of the third-party litigation. N.J.S.A. 34:15-40(d).

We note at the outset that from the date of her accident through her discovery deposition in the personal injury litigation, Brown regarded herself as an employee of Linens 'N Things. In her interrogatory answers, Brown described herself as a "Human Resource Clerk" at Linens 'N Things in Clifton, New Jersey. She described the accident as follows: "On January 16, 2004[,] at about 7:45 a.m. I was in route to my place of employment at Linens [']N Things, 6 Brighton Road, Clifton, New Jersey." She stated further than she "ha[d] received workers' compensation benefits."

Brown's deposition contains the follow exchange:

Q: Where did the accident happen?

A: In the parking lot of . . . Linens 'N Things.

Q: Were you employed by Linens 'N Things at that time?

A: Yes.

Q: How long had you worked for Linens 'N Things on that date?

A: I had started November the 4th of 2003.

Q: Between November 4, 2003 and January 16, 2004, were you working there on a full-time basis?

A: Yes.

Q: What were the hours of the store?

A: It's not the store; it's the corporate office. . . . .

Q: [Buildings] 2, 4 and 6 are all parts of the same corporate office?

A: Yes.

Q: How many employees worked at that location?

A: I think it's maybe about 4 . . . [to] 500 people between the three buildings.

Q: And of these 4 to 500 people, they would be combinations of executives and other people who worked different hours?

A: Yes, hourly people. . . . .

Q: That's a corporate or office building?

A: We call that home office corporate.

Q: That's not, like, your normal Linens 'N Things store where you go to shop?

A: No. It's not a store at all, no.

In her certification supporting her "cross-motion" to authorize disbursement of the settlement proceeds, Brown stated:

Immediately after the accident I reported to my supervisor that I had been injured in an accident. I did nothing to initiate a workers' compensation claim. I have never filed a workers' compensation claim or petition. I never applied for any workers' compensation benefits.

In her deposition, however, Brown had earlier testified as follows:

Q: After you were able to get up, did you proceed into work on January 16th?

A: Yes I did.

Q: Did you work your regular shift?

A: Yes, I did.

Q: Did you report the condition that caused you to fall to anyone at your employer?

A: Yes, I did, workers' comp.

Q: Did you have a manager at that time?

A: He was not in.

Q: Did you have someone you reported to if there were a problem of this sort?

A: Well, if I understand you correctly, when I came in, I reported to workers' comp and then when my supervisor came in, I reported it to him.

A: The only thing that workers' comp had asked me, they said, "Can you get to our Medicenter?" . . . .

Q: When was the first time you sought out any medical treatment for this?

A: I believe it was the 19th of January of 2004.

Q: Who did you go to?

A: It's called The Medicenter in Clifton.

Q: And were you referred there by your employer?

A: Yes.

The foregoing demonstrates that, notwithstanding her subsequent realization that her employer was LNT Services, Inc., Brown held herself out as an employee of Linens 'N Things corporate offices from the date of the accident throughout pre-trial discovery in the personal injury litigation. Also, despite her claim to the contrary, it appears she did speak to a workers' compensation representative of her employer immediately following her accident.

In his February 1, 2007 letter to Liberty Mutual, Cipriano had appended copies of Brown's pay stubs, as well as her 2005 W-2. These documents identify her employer as: "LNT Services Inc., 6 Brighton Road, Clifton, N.J. 07016." Brown's place of employment with Linens 'N Things' was at 6 Brighton Road, Clifton, New Jersey.

Under these circumstances, we reject defendants' argument that Brown had no employer-employee relationship with Linens 'N Things and that we should not "disregard the corporate formalities . . . ." In support of this argument defendants note that "[c]courts estop litigants from playing 'fast and loose' with the facts, saying one thing and then the opposite." We conclude, however, that Liberty Mutual has engaged in no such conduct. Whether inadvertently or knowingly, Brown identified Linens 'N Things as her employer. As noted, she acknowledged speaking to a workers' compensation advisor at her work site immediately after her accident. That advisor presumably contacted Liberty Mutual as the employer's workers' compensation insurance carrier, thereby setting in motion the procedures leading to the payment of benefits for Brown's injury. Brown's receipt of those benefits is undenied.

The trial court addressed this issue as follows:

But the question I have is this. Is it a . . . distinction without a difference. Is it a technical corporate disconnect, which ignores . . . what actually happened here. Nobody disagrees with what happened here. She was injured on the job. She was entitled to workers' compensation benefits. She received workers' compensation benefits from Linens-N-Things, and she recovered $120,000 from a third source, and . . . Liberty Mutual, who was out all of this money, seeks to recover two-thirds of what was laid out pursuant to the workers' compensation statute.

Isn't this form over substance? . . . .

And isn't it unconscionable for your client . . . to retain those benefits at the expense of . . . Liberty Mutual?

The trial court concluded that there was "no question in [its] mind that . . . [Liberty Mutual] is entitled to a lien." In an effort to supplement the record, the judge asked plaintiff's attorney to submit documentation of the "relationship" between Linens 'N Things and LNT Services., Inc. As noted, counsel thereafter submitted a flow chart showing, in counsel's interpretation, that "'LNT Services, Inc.' is the corporation for the home office and distribution centers for whom the injured employee worked."

The trial judge afforded defendants an opportunity to respond to plaintiff's submission. However, it appears defendants never did so.

In sum, we concur with Liberty Mutual's position that we should "pierce the corporate veil by finding" that LNT Services, Inc., is a "subsidiary . . . [and] a 'mere instrumentality of the parent corporation[,]'" namely Linens 'N Things. Dept. of Environ. Prot. v. Ventron, 94 N.J. 473, 500 (1983) (quoting Mueller v. Seaboard Commercial Corp., 5 N.J. 28, 34-35 (1950)). To do otherwise would be to condone a situation in which an injured employee collects workers' compensation benefits and thereafter receives monetary damages in a third-party liability action with no obligation to reimburse the workers' compensation insurer.

The trial judge's order of October 1, 2007, properly preserves Liberty Mutual's right to pursue its statutory lien against the settlement proceeds from Brown's third-party law suit. N.J.S.A. 34:15-40.


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